PARIS: European shares rose nearly 1% on Tuesday, with banking stocks leading the recovery following a raft of measures to stabilise the sector, while investors hoped for less-aggressive moves by the US Federal Reserve at its policy meeting this week.

The pan-European STOXX 600 index was up 0.9% by 0809 GMT, extending gains after the index sharply recouped intraday losses and closed the session up nearly 1% on Monday. The Fed begins a two-day meeting later in the day and after a wild few sessions US interest rate futures pricing implies that a peak in rates is either imminent or already reached, with newfound stability concerns to push inflation-fighting aside.

Europe’s banking index jumped 1.8%, with shares in Swiss banks Credit Suisse trading flat and UBS gaining 3.5%. Banking stocks globally breathed a sigh of relief on Monday after UBS’s state-backed takeover of the 167-year-old Credit Suisse raised hopes that a wider banking crisis was averted in the near-term, although worries lingered about smaller US banks and the damage to credit markets.