European shares struggled to find direction on Thursday as caution dominated the sentiment among investors ahead of the European Central Bank’s key interest rate decision. Shares in Credit Suisse rose after a bailout from the Swiss National Bank (SNB) eased some fears of a possible global banking crisis, Reuters reported.

• UPDATE 15:38 The ECB raised interest rates by 50 basis points on Thursday as promised, ignoring chaos in financial markets and calls from investors to ease policy at least until confidence stabilizes.

The STOXX 600 index was nearly neutral by 1:30 p.m. after rising 1.6 percent in morning trade. The index is down nearly 3.8 percent this week as the collapse of Silicon Valley Bank last week fueled concerns about tensions in the global banking sector and sent banking stocks tumbling.

The banking sector index was up just 0.22% after posting its sharpest one-day drop in more than a year in the previous session.

Shares in Credit Suisse jumped 20% after the bailout

Credit Suisse, at the center of Europe’s banking crisis, rose 19.8 percent after it said it would borrow up to $54 billion from Switzerland’s central bank to shore up liquidity and restore investor confidence.

Shares in the Zurich lender fell 24% to a record low on Wednesday.

“It looks like there is a bailout for the troubled credit institution that should prevent another Lehman moment, fortunately for Credit Suisse markets and investors,” said Victoria Sholar, the company’s chief investment officer. Financial Interactive Investor.

“The bank, which has been around since 1856, has played an important role in supporting the growth of the Swiss economy, with the SNB clearly understanding that the bank’s systemic importance outweighs any moral hazard argument,” she added.

All eyes are now on the ECB

The cost of insuring European corporate junk bonds also fell, indicating a sense of relief among investors.

All eyes are on the ECB meeting later on Thursday for the first major indication of how policymakers will respond to growing fears about banks.

“On the one hand, we have rising inflationary pressures in the eurozone, which the ECB needs to suppress through more aggressive rate hikes, and on the other hand, we now have a strain on the banks due to rising yields,” Ipek said. , senior analyst at Swissquote Bank.

“The ECB will need to find a middle ground to reduce the burden on banks and continue to fight inflation, and a 25 basis point hike could be that middle ground,” he added.

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