There can be no question that Shylock is presented as an evil character that we are intended to hate. In his first scene he states his hatred of Antonio and unfurls his scheme to try and murder him and as the play progresses, we see more and more of his personality. We learn that he is puritanical in that we never see him jest and seems to take no pleasure from the usual past-times (he hates music for example). He is so driven by profit that he would rather kill his own daughter than lose his wealth and he goes to extraordinary lengths to kill Antonio simply because he undermines his business practices. In all five of his scenes, he is bitter to the last. The question is this, are these traits derived from his Jewishness or from the Christians' mockery of his Jewishness, or is he simply an evil individual?
It is certain that Antonio and the other Christians constantly mock Shylock's religion and isolate him from their social group. In the entire play, Shylock is only called by his name directly five times, and these are nearly all in his first scene as Shakespeare introduces his character. At all other times he is referred to and called 'Jew'. This immediately introduces the religious barrier and separates him from the Christians. Solanio calls him 'dog Jew' and in III:3, he calls him 'most impenetrable cur.' The fact that people refuse to call him Shylock strips him of his humanity and distances him from the Christians. He is even frequently compared to as the devil by Solerio and Solanio.
Solerio and Solanio are the characters that are most anti-Semitic in the way that they treat Shylock in public. In III:1, they both mock him, twisting his words and insulting him. They then once again call him a devil, this time to his face. They have no sympathy for Shylock's daughter's desertion and theft of his wealth and admit to knowing of her planned escape. These characters are included to incite the audience, to laugh at Shylock. They are also there however, to promote sympathy for Shylock. For Example in this scene as he preaches a common humanity asking 'hath not a Jew hands, organs, dimensions, senses, affections, passions?' The sympathy never lasts long though, as Shylock then goes on to show his desire for revenge and later to wish his own daughter dead. No matter how angry he may be with her, no good father can choose simple jewels over his daughter. Then we are encouraged to sympathise again with him as we learn that Jessica exchanged a ring given to Shylock by his late wife for a monkey. This is the only scene where we can truly see that Shylock did once have love for someone and his torment is evident as Tubal, his apparent friend, taunts him with good news then bad and good again. By the end of the scene, Shylock is suffering considerable distress as he repeats Tubal's name three times in one sentence.
It is this that the audience is toyed with their opinion of Shylock first to hate him, then to sympathise with him. It is clear that Shakespeare himself was not undeniably anti-Semitic but responds to the audience's enthusiasm for the abuse of Jews. He does however; include subtle sympathy for Shylock in many parts of the play. Shylock did have reasonable cause to dislike Antonio as he states in I:3:
I (Shylock) hate him (Antonio) for he is a Christian:
But more, for in that low simplicity
He lends out money gratis, an bring down
The rate of usance here with us in Venice.
In fact, Antonio is a spitting image of Shylock in that they are both conservative, aggressive towards each other and have no partners. Although Shylock continues to say he hates Antonio because he is a Christian, his main reason is Antonio's deliberate undermining of Shylock's business as Antonio himself admits in III:3:
He (Shylock) seeks my life, his reason well I know;
I oft delivered from his forfeitures
Many that have at times made moan to me;
Therefore he hates me.
This gives Shylock's hatred greater authority. It also alerted thinking Elizabethans to the fact that it was unfair of Antonio and the Christians to attack Shylock solely for his Jewishness as Shylock had at least a more pressing motive than simply difference in religion.
This could be partly the reason that Shylock had become so anti-social as even his fellow Jews (Tubal in III:3) mocked him and his daughter said his house was like hell to live in. He certainly had grounds to be bitter towards Antonio, Salerio and Solanio and to an extent, Jessica as she had shown contempt him and performed deeds that she knew would upset her father terribly. In response to these however, Shylock always seemed to over react and pass beyond the threshold of acceptable behaviour. It is excusable for him to have wanted to scold his daughter and be angry with her but not to want her dead. It is also reasonable for Shylock to take Antonio to court in IV:1 as Antonio had entered the bond of flesh with willingly and knew the risks he was taking, but it is stubborn evilness to refuse twice the sum of money from Bassanio and we hear how bent he was on vengeance in III:2 from Salerio:
"Twenty merchants,
The duke himself, and the magnificoes,
Of greatest port have all persuaded with him,
But none can drive him from the envious plea
Of forfeiture, of justice, and his bond.
In the court scene Shylock has the tables turned on him but we cannot help feeling some pity for him. An Elizabethan audience would have probably felt less however. Shylock is forced to convert to Christianity and give up half his fortune. Being forced into Christianity is a ridiculous idea now, but then it was seen as a kind mercy as Shylock was actually being 'saved' as his daughter already had been. The fact that he then appears to lose all his dignity and apparent former sophistication. Shylock leaves the stage distraught with none of the dignity that Antonio had shown when faced with defeat. No doubt his departure would have been followed by Elizabethan cheers that were getting exactly what they wanted.
Without doubt, Shakespeare made Shylock into a caricature to an extent and so some of his actions such as the constant drive for profit can be explained by that. His Jewishness also goes some way to explain his resentment of the Christians as they scorned his religion. There is nevertheless an amount of unnecessary inhumanity present in him, for instance his over enthusiastic pleasure in the pain of Antonio in scene III:1 'I'll plague him, I'll torture him & I am glad of it' and his want of his own daughter dead.