Irish bank shares join global relief rally, but jitters ahead of Fed meeting            

Federal Reserve chairman Jerome Powell: Investors wait nervously ahead of US rate decision on Wednesday night.         

Irish bank shares joined a relief rally of global shares, but market jitters  over whether the US central bank could add fuel to the fire by hiking interest rates on Wednesday night show that the turmoil of the past weeks is far from over. 

"While the problems at SVB (Silicon Valley Bank) and Credit Suisse had been dealt with, markets had remained edgy," said chief markets analyst Chris Beauchamp at IG, an online broker. 

The global banking crisis that emerged barely two weeks ago has cost the collapse of US lenders Silvergate, Signature Bank, and Silicon Valley Bank, and put under pressure a host of US regional banks such as First Republic which continues its fight to survive with the potential help of Wall Street giants. 

The wave of crisis swept into Europe and by last weekend Credit Suisse which was facing a flight of billions of Swiss francs as customers withdrew money.

By Sunday night, Credit Suisse had been forced into a €3bn shotgun takeover with fellow Swiss banking giant UBS. 

On Tuesday, First Republic shares climbed 35% in the US, clawing back some of the hefty stock market losses this week alone, while UBS shares closed 12% higher in Zurich trade. 

Irish bank shares which had along with their European peers been hit in recent days also rose. AIB and Bank of Ireland shares closed 5.5% and almost 7% higher, and Permanent TSB gained 2%. 

However, stock market investors are anticipating nervously what the US Federal Reserve will say about further interest rate hikes on Wednesday night. 

Comments by regulators on both sides of the Atlantic about their banking systems had helped support the banking sector, but "will the Fed spoil the party?", asked Mr Beauchamp.

A new round of US rate increases could likely put pressure on the European Central Bank to continue with its anti-inflation measures, but both central banks must weigh whether their actions would spark a further round of banking  turmoil that could possibly lead to the collapse of more banks. 

“There is still the chance that the Fed will deliver a hawkish message tomorrow, but traders are betting that the risk of such a statement...could deliver a killer blow to the rally. As such, (Wednesday's) meeting is the real hurdle for markets to navigate, but a dovish Fed could open the floodgates for further upside, even given the unsettling events of the past," Mr Beauchamp said. 

Meanwhile, recriminations in the US continued with Silicon Valley Bank saying in court documents that the US Federal Deposit Insurance Corporation had taken "improper actions" to cut it off from cash.

In a nod to concerns that banks may not be out of the woods, US Treasury Secretary Jane Yellen said that further US government intervention is possible if another smaller bank experiences difficulties similar to those of other recently failed lenders.

Irish Examiner, with additional reporting Reuters