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PARIS (Reuters) – European stock markets ended higher on Tuesday with the easing of tensions in the banking community and the hope that the Federal Reserve will opt for a limited rate hike after two days of debate.

In Paris, the CAC 40 gained 1.42% to 7,112.91 points. The British Footsie advanced 1.79% and the German Dax 1.75%.

The EuroStoxx 50 index gained 1.51%, the FTSEurofirst 300 1.31% and the Stoxx 600 1.33%.

At the time of the close in Europe, the main Wall Street indices were also moving in the green, with the Dow Jones gaining 0.53%, the Standard & Poor’s 500 0.71% and the Nasdaq Composite 0.87%.

The Fed’s monetary policy committee is due to publish its conclusions on Wednesday evening and the markets are widely anticipating a rate hike limited to a quarter of a point given the upheavals experienced by banks in recent days.

“A 50 basis point hike would be too big in this environment, but a status quo could be interpreted as if the Fed knows something that we don’t,” said Daniel Lenz at DZ Bank. “That’s why, despite inflation and the problems facing the United States, we expect a rate hike of 25 points.”

Calm appears to have returned to global equities after a tumultuous two weeks in reaction to the collapse of a number of US regional banks and the woes of Credit Suisse. The rescue of the latter by its rival UBS as well as a series of measures taken by the authorities on both sides of the Atlantic have alleviated the fear of a large-scale destabilization of the financial system.

Wanting to be reassuring, Treasury Secretary Janet Yellen said she was ready to intervene to protect customers of small American banks in the event of difficulty, to avoid a scenario at the SVB.

VALUES IN EUROPE

The European banking index jumped 3.79%, the biggest sectoral increase. In Paris, Credit Agricole, BNP Paribas and Societe Generale took from 2.25% to 4.30%.

Thyssenkrupp gained 4.48% as sources said several groups, including the CVC fund, would be interested in the German conglomerate’s steel business.

RATES Bond yields are regaining ground after their marked decline in Monday’s session. That of the German Bund at ten years appears at 2.277% at closing and that at two years increased by 26 basis points to 2.578%, its largest daily increase since September 2008.

The ten-year American takes nearly nine basis points to 3.5771%.

EXCHANGES On the foreign exchange market, the dollar is unchanged against a basket of reference currencies. The euro gained 0.49%, around 1.0772 dollars.

OIL

Like equities, the oil market continues to rebound, a barrel of Brent taking 0.73% to 74.33 dollars and that of American light crude 1.24% to 68.48 dollars.

(Laetitia Volga, edited by Jean-Stéphane Brosse)

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