London’s top shares faced a rollercoaster session on Thursday, with traders sending the FTSE 100 up and down throughout the day, but despite turbulent trading it managed to close on a high.
Coming off the index’s worst day for three years on Wednesday amid worries over the future of banking giant Credit Suisse, Thursday trading was highly erratic.
The top tier index initially gained ground, looking set for a rebound as trading opened after Swiss authorities extended a £45 billion emergency loan to the under-pressure bank.
But through the day it was knocked around like a yo-yo, at one point even dipping into negative territory. By the end of the day it had gained 0.9%.
The deepening crisis at Credit Suisse, just days after Silicon Valley Bank and Signature Bank collapsed in the US, has sparked fears the banking sector is heading for a full-blown crisis.
Credit Suisse said it will borrow up to 50 billion Swiss francs (£45 billion) from Switzerland’s central bank to bolster its finances.
The loan was intended to boost its liquidity and calm investors a day after the bank’s share price plummeted by 24%.
But its shares rose by about 19% in Zurich and the wider markets bounced back as European and US indexes regained some, but far from all, of the ground they had lost on Wednesday.
But experts said the rebound was “underwhelming” and markets will remain volatile.
Chancellor Jeremy Hunt said he welcomes efforts to boost the liquidity of Credit Suisse.
He told Times Radio: “I monitor what is going on in the markets, the Bank of England governor monitors carefully what is going on, he keeps me informed.
“I think the news we have heard from the Swiss authorities overnight is welcome.”
Earlier, he told Sky News the developments in Switzerland are “encouraging”.
The Bank of England is said to have been in emergency talks with its global central banking counterparts last night as the crisis deepened, and was reportedly in touch with both Credit Suisse and the Swiss National Bank regarding the emergency loan.
But Neil Wilson, chief markets analyst at Finalto, said: “After such a heavy drubbing yesterday, the gains this morning are fairly underwhelming – not to say they won’t pick up later, a lot depends on Credit Suisse sentiment and the European Central Bank later.”
Traders will be closely watching the latest interest rate decision by the European Central Bank on Thursday, amid expectations it will temper any hike due to the market turmoil.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “As investors await that decision, trading is expected to stay volatile.
“If policymakers decide to ease off another big monetary policy squeeze, the initial market reaction is likely to be one of relief, but worries are then likely to bubble back up about the insidious effect of inflation and whether the price spiral risks getting out of control again.”