European shares rise as bank contagion fears ease

European stocks rose at the open on Monday as traders balanced their concerns over a potential recession and its implications for interest rates against better than expected results from several of the biggest banks in the US.

Europe’s region-wide Stoxx 600 added 0.4 per cent, Germany’s Dax also rose 0.4 per cent and London’s FTSE 100 gained 0.5 per cent in early trading.

Across the Atlantic, contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 were both up 0.3 per cent ahead of the New York open.

The moves in equity markets came after upbeat first-quarter earnings from JPMorgan, Citigroup and Wells Fargo on Friday, which underscored how the failure of several regional banks in March had benefited the biggest lenders and eased investors’ concerns about a wider banking crisis. The Euro Stoxx banks index rose 0.5 per cent, with Dutch group ABN Amro up 1 per cent.

Late on Monday, Charles Schwab — whose shares have not recovered since selling off following the collapse of Silicon Valley Bank — is due to release its results, with traders on the lookout for signs of weakness on its bond portfolios.

One of Schwab’s biggest shareholders in March sold its entire $1.4bn stake in the bank, fearing that like SVB it had failed to hedge its portfolio of mortgage-backed bonds, treasuries and debt securities against rising rates.

Investors broadly expect a further quarter percentage point rise when the Federal Reserve meets early in May with inflation at 5 per cent — far above the central bank’s 2 per cent target. Christopher Waller, a hawkish Fed governor, on Friday said monetary policy needed “to be tightened further” to cool the economy.

The US dollar index rose 0.1 per cent against a basket of six other currencies, though it has slipped 1.8 per cent since the start of the year as traders have upped their bets that May’s expected interest rate rise will be the Fed’s last.

US government debt sold off slightly, with two-year Treasury yields up 0.02 percentage points to 4.12 per cent. The yield on 10-year notes was unchanged at 3.52 per cent.

Asian stocks rallied after China’s new home prices rose 0.5 per cent in March, the fastest pace in 21 months, and ahead of the release of the country’s first-quarter gross domestic product numbers on Tuesday.

Hong Kong’s Hang Seng index surged 1.7 per cent while the CSI 300, China’s key benchmark of onshore-listed companies, rose 1.4 per cent.