European stocks rise as fears of banking turmoil ease

March 17 (Reuters) – European stocks extended their rally for a second consecutive session on Friday as support measures for banks in the United States and Europe eased fears of an impending decline in the sector, even if the index was on track for a second consecutive drop week.

The pan-European STOXX 600 index was up 0.8% at 0805 GMT, as banks gained 1.3%, after the $30 billion lifeline given by major US banks to First Republic Bank.

The package came less than a day after Credit Suisse secured an emergency loan from the Swiss central bank of up to $54 billion to bolster its liquidity.

Credit Suisse was up 1.8% in early trading, after climbing 19% on Thursday.

The main equity indices of Spain and Italy, which are highly exposed to banks, rose 0.7% and 1.0% respectively, but continued their trajectory of heavy weekly losses.

Overall, the STOXX 600 index closed 1.2% higher on Thursday, after some back and forth, with Credit Suisse’s lifeline offsetting concerns over the sharp 50 basis point (bp) rise in European Central Bank rate. (.EU)

The ECB’s decision reflects the central bank’s priority in fighting inflation and also strong confidence in the soundness of European banks, said Francois Villeroy de Galhau, a member of the ECB’s Governing Council.

Goldman Sachs lowered its forecast for an ECB interest rate hike in May to 25 basis points.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing in Spanish by Benjamín Mejías Valencia)