European stocks rallied on Wednesday, with banks leading the gains, after the European Central Bank said its rate-setting Governing Council would hold an unscheduled meeting to discuss the recent sell-off in government bond markets.

An index of euro zone shares climbed 1.5%, while the pan-European STOXX 600 added 1%.

Italian bank stocks, which have taken a hit recently on fears about Rome’s surging debt costs, rallied, as the government bond yields tumbled.

Euro zone shares slide 1% after ECB signals rates lift-off

Shares of Unicredit, Intesa Sanpaolo and BPER Banca rose between 4.3% and 5.6%, while the broader Italian banking index climbed 5%.

“Clearly, the market is pricing in some kind of an intervention,” said Teeuwe Mevissen, senior macro strategist at Rabobank.

Shares of euro zone banks have fallen sharply in the past week, hit by a selloff in southern European bond markets after the ECB said last week it saw no need to create a new tool to help weaker economies cope with rising borrowing costs, as it ends bond buying and looks to hike rates.

The ECB’s surprise meeting was scheduled for 0900 GMT but it was not yet clear whether a statement would be published, several sources with direct knowledge said.

“The fact that the ECB is now stepping up to address the matter is a positive thing,” said Charalambos Pissouros, head of research at JFD Brokers.

“However, if there aren’t any important details delivered today, we see the case for the massive selling in bonds to continue.” The Federal Reserve will release its policy decision at 1800 GMT, with most traders anticipating a bigger 75 basis point interest rate hike, following a hot US inflation reading last week.

The STOXX 600 marked its sixth consecutive session of losses on Tuesday, lingering near a three month on worries that aggressive US rate hikes will push the world’s largest economy into a recession.

Soaring inflation, slowing Chinese economy and the Ukraine conflict have clouded the outlook for global and the European economy, sending the STOXX 600 down about 16% so far this year.

Swedish medical equipment maker Getinge slumped 15.5% after cutting its sales forecast for 2022. H&M, the world’s second-biggest fashion retailer, fell 4.4% despite posting a bigger-than-expected rise in quarterly sales.

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