European Stocks Rebound as Banking Sector Regains Confidence Ahead of Federal Reserve Meeting

European stock markets surged on Tuesday, buoyed by a newfound confidence in the banking sector ahead of the Federal Reserve's latest policy-setting meeting. Germany's DAX index traded up 1.1%, France's CAC 40 climbed 1.2%, and the UK's FTSE 100 rose 1.2%. Investor sentiment has been bolstered by the rescue of troubled lender Credit Suisse by Swiss rival UBS, which saw UBS stock climb over 3% and dragged the rest of the embattled banking sector higher.

Although it's too early to declare an end to the banking turmoil, there's been little funding stress, with global banks borrowing only small amounts from the Federal Reserve's dollar swap line. The Federal Reserve's two-day meeting starting later this session has investors' attention, and the degree of uncertainty created by the banking sector's turmoil has raised questions about whether the US central bank will continue to lift interest rates to combat elevated inflation. The same applies in Europe, where the European Central Bank's president, Christine Lagarde, told lawmakers that financial stability tensions might have an impact on demand and might do part of the work that would otherwise be done by monetary policy and interest rate hikes.

Germany's ZEW Survey Expected to Show a Drop in March

The main economic release expected on Tuesday is Germany's ZEW survey of economic sentiment for March, which is expected to show a drop to 17.1 from 28.1. RWE stock rose 2.9% after Germany's largest utility announced plans to increase its dividend, and Kingfisher stock rose 0.6% after the British home improvement retailer reported better-than-expected annual income.

Oil Prices Rise

Oil prices rose on Tuesday, bouncing back after recent hefty losses, as the rescue of Credit Suisse eased worries about global banking sector risks that could hit economic growth and fuel demand. Brent crude was up 0.7% at $74.31 per barrel, while US West Texas Intermediate gained 0.8% to trade at $68.16.

Dollar Index Rises Ahead of U.S. Fed’s meeting

The decision by the US Federal Reserve on Wednesday on whether and by how much to raise interest rates when it concludes its two-day meeting is the next focus for investors. Markets have revised down expectations for the next Fed rate hike to 25 basis points from 50 bps. The dollar index rose on Tuesday after hitting a five-week low the previous session.

OPEC+ Meeting Scheduled for April 3

A meeting of key ministers from OPEC+ is scheduled for April 3, and sources told Reuters the drop in prices reflects banking fears, rather than a worsening supply and demand balance. The latest US oil inventory reports are also coming into view, with a Reuters survey expecting lower crude and product inventories. The American Petroleum Institute's first report is due out at 2030 GMT on Tuesday.