US stocks rebound as bank shares rally, while oil prices tumble

US and European stock markets rebounded on Tuesday amid easing worries over bank industry turmoil, while oil prices fell sharply on recession risks.

Shares of banks recovered after markets were rocked earlier this week by the collapse of two US regional lenders, which forced authorities to launch emergency measures aimed at preventing contagion across the sector.

Big jumps by First Republic Bank and other regional banks lent support to major US indices, with the S&P 500 piling on 1.7 percent.

"US banking stocks are on a rollercoaster ride, rising sharply following the steep sell-offs yesterday as worries seem to be lifting a little about contagion from the SVB (Silicon Valley Bank) collapse," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

The rally in New York came on the heels of a buoyant day in Europe, with London, Paris and Frankfurt all advancing at least one percent.

Investors also digested US data that showed the consumer price index rose six percent from a year ago, below January's figure and in line with expectations.

While this was the smallest annual rise since September 2021, the level remains well above policymakers' longer-term two percent inflation goal.

Federal Reserve Chair Jerome Powell initially said the central bank is prepared to increase the pace of rate hikes if necessary, but the collapse of SVB last week and New York-based Signature Bank may complicate its efforts.

Analysts at Goldman Sachs and Wells Fargo now predict the Fed will end its hiking cycle on March 22, while economists at JP Morgan and Oxford Economics see Fed policymakers voting for a quarter-point hike.

Taken together, the readings are "not good enough to stop the Fed hiking next week, provided markets are calm," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Underlying inflation in services is "declining painfully slowly" as well, he said, adding that the progress will not be enough to placate more hawkish policymakers.

In other markets, oil prices finished at a four-month low, with US benchmark contract West Texas Intermediate falling nearly five percent to $71.33 a barrel.

"This whole banking situation, just has the oil market worried about the impact on the economy. It's just enhancing the recession fears," said John Kilduff of Again Capital.

"It reduces investor confidence or just confidence in the economy overall. It doesn't bode well for the outlook for energy, for oil demand," he added.

Among individual companies, Facebook parent Meta Platforms jumped 7.3 percent after announcing it will shed 10,000 jobs in the coming months and leave 5,000 other roles unfilled.

- Key figures around 2050 GMT -

New York - Dow: UP 1.1 percent at 32,155.40 (close)

New York - S&P 500: UP 1.7 percent at 3,920.56 (close)

New York - Nasdaq: UP 2.1 percent at 11,428.15 (close)

London - FTSE 100: UP 1.2 percent at 7,637.11 (close)

Frankfurt - DAX: UP 1.8 percent at 15,232.83 (close)

Paris - CAC 40: UP 1.9 percent at 7,141.57 (close)

EURO STOXX 50: UP 2.0 percent at 4,179.47 (close)

Tokyo - Nikkei 225: DOWN 2.2 percent at 27,222.04 (close)

Hong Kong - Hang Seng Index: DOWN 2.3 percent at 19,247.96 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,245.31 (close)

Dollar/yen: UP at 134.20 yen from 133.21 yen on Monday

Euro/dollar: UP at $1.0735 from $1.0731

Pound/dollar: DOWN at $1.2156 from $1.2183

Euro/pound: UP at 88.29 pence from 88.08 pence

West Texas Intermediate: DOWN 4.6 percent at $71.33 per barrel

Brent North Sea crude: DOWN 4.1 percent at $77.45 per barrel