European stocks extend gains as banking concerns fade

European stocks advanced on Thursday while US futures ticked higher following an overnight rally on Wall Street as traders’ concerns about a prolonged banking crisis receded.

The region-wide Stoxx 600 added 0.8 per cent to reach its highest level in two weeks in early trading ahead of the latest figures for eurozone consumer, industrial and economic confidence.

Spain’s inflation slowed to an annual rate of 3.1 per cent, lower than the 4 per cent forecast by economists polled by Reuters. London’s FTSE 100 gained 0.4 per cent, and the Dax in Germany rose 1 per cent.

Contracts tracking Wall Street’s S&P 500 and the tech-heavy Nasdaq 100 rose 0.2 per cent and 0.3 per cent, respectively. Led by technology stocks, both indices posted strong gains on Wednesday and have edged higher over the past month despite severe stress in the banking sector.

The collapses of Silicon Valley Bank in the US and Credit Suisse in Europe have “shaken confidence in the western banking system” but what happened was “idiosyncratic and will prove well contained”, said analysts at Barclays. “However, credit contraction is likely to materialise as lending standards tighten due to greater conservatism.”

Bond markets rallied, with the yield on the two-year US Treasury note down 0.03 percentage points at 4.04 per cent. The yield on the 10-year Treasury slipped 0.02 percentage points to 3.54 per cent. Yields fall when prices rise. The dollar was flat against a basket of six other currencies.

Attention on Wall Street is likely to focus on the latest numbers for initial jobless claims in the US, with any jump likely to stoke concerns of an imminent recession. Equally, an unexpected drop may reinforce bets that economic activity remains strong, lowering the chances of a pause in interest rate rises from the Federal Reserve.

Susan Collins, president of the Boston branch of the US central bank, will speak on the economic outlook and monetary policy at the annual conference of the National Association for Business Economics, as the central bank weighs another 0.25 percentage point rate increase in May.

Asian equities fluctuated. Hong Kong’s Hang Seng index added 0.5 per cent, China’s CSI 300 gained 0.8 per cent and Japan’s Topix lost 0.6 per cent.

Prices for Brent crude were steady at $78.28 a barrel. Gold, considered a haven asset, rose 0.2 per cent to $1,968 an ounce.