European stock markets rebounded slightly on Thursday after troubled banking giant Credit Suisse secured a big financial lifeline and before a crucial interest-rate decision by the European Central Bank.
Frankfurt, London and Paris won modest gains, a day after plunging about 3.5 per cent over fears about the health of Credit Suisse and the wider banking system following the implosions of two US lenders.
The euro advanced against the dollar ahead of the ECB's rate decision due on Thursday.
Oil prices dipped slightly after plunging to their lowest levels in 15 months on Wednesday.
"One minute the market is worried about a banking crisis, the next minute it is more relaxed," noted Russ Mould, investment director at stockbroker AJ Bell. "The next test for the markets will be the ECB's interest rate decision... It seems unthinkable that it would go for an aggressive 50-basis point hike given the nervousness around the banking system."
One minute the market is worried about a banking crisis, the next minute it is more relaxed- Russ Mould, investment director at stockbroker AJ Bell
The ECB call is the first by a major central bank since markets were rocked by banking crisis fears, testing the eurozone institution's resolve to implement another hefty rate hike.
Investors say the ECB should reconsider its plans following the collapse of Silicon Valley Bank (SVB) and Signature, the sector's biggest failures since the 2008 global financial crisis.
There is much debate also over whether the US central bank will continue with its rate tightening campaign as the collapse of SVB has been widely linked to the sharp rise in borrowing costs over the past year.
Some commentators expect officials to lift rates once more next week but possibly hold afterwards, while there is a growing belief that it could even announce cuts before the end of the year.
The market rout has forced Credit Suisse to tap on a financial lifeline from the Swiss central bank.
After seeing its stocks in freefall on Wednesday, Switzerland's second biggest bank, already battling multiple scandals, sought to stave off the latest crisis by announcing it would borrow up to $53.7 billion from the country's central bank.
Its shares soared more than 30 per cent at the open on Thursday.
"Fear has once again gripped the markets, concerned about a repeat of past crises... and the implications for the financial system and global economy," said Craig Erlam, senior analyst at OANDA trading group. "Of course, this is natural when so little is known about the situation and what it ultimately means for the health of the rest of the system."