European share prices continued to recover early Friday, though the FTSE 100 in London remains down for the week as a whole, amid a crisis of confidence in the banking sector.

A wild week saw banking stocks plunge in light of the collapse of Silicon Valley Bank and liquidity worries at Credit Suisse. US officials have sought to reassure depositors and markets, however.

The FTSE 100 index opened 96.05 points, 1.3%, higher at 7,506.08 on Friday. For the week, it is down 3.1%.

The FTSE 250 was up 136.29 points, 0.7%, at 18,894.87, and the AIM All-Share was up 2.75 points, 0.3%, at 816.82.

The Cboe UK 100 surged 1.4% to 751.29. The Cboe UK 250 climbed 0.7% to 16,466.27. The Cboe Small Companies traded flat at 13,490.25.

In mainland Europe, the CAC 40 in Paris was up 1.1%, while the DAX 40 in Frankfurt rose 0.9%.

Shares in Asia ended higher. The Nikkei 225 in Tokyo rose 1.2% and the S&P/ASX 200 in Sydney added 0.5%. In China, the Shanghai Composite rose 0.7%, while the Hang Seng in Hong Kong added 1.6%.

In New York on Thursday, the Dow Jones Industrial Average surged by 1.2%, the S&P 500 by 1.8%, and the Nasdaq Composite by 2.5%.

The pound was quoted at $1.2152 early Friday, up from $1.2110 late Thursday. The euro stood at $1.0661, higher against $1.0619. Against the yen, the dollar was trading at JP¥133.70, up against JP¥133.09.

The Federal Reserve has lent US banks nearly $12 billion under a new one-year lending programme unveiled Sunday, as authorities moved to ease stress on the financial system after Silicon Valley Bank’s collapse.

The total outstanding amount of all advances under the Bank Term Funding Program reached $11.9 billion by Wednesday, the US central bank announced in a statement on Thursday.

The Fed had unveiled the scheme alongside the Treasury and the Federal Deposit Insurance Corp on Sunday night, as authorities looked to prevent other banks from running into the liquidity issues that ultimately doomed California’s SVB.

In addition, some of the largest US banks have banded together to deposit $30 billion into First Republic in an attempt to bolster its finances and contain the fallout from the collapse of two major lenders in the past week. JPMorgan, Bank of America, Citigroup and Wells Fargo are among those providing the funds.

First Republic shares, already supported by news that the Swiss National Bank had stepped in to offer liquidity to embattled Swiss lender, Credit Suisse, added 10% in New York on Thursday.

US Treasury Secretary Janet Yellen said the banking system remains sound despite market anxiety.

Europe’s banking sector also received a vote of confidence.

European banks are in ‘extremely solid’ shape, and their situation is not similar to that of some US lenders, the French central bank chief said Friday amid fears of a crisis in the sector.

‘European banks are not in the same situation as certain American banks for a very simple reason which is that they are not subjected to the same rules,’ Francois Villeroy de Galhau, who is also a member of the European Central Bank’s governing council, told BFM Business television.

‘Some optimism has returned to markets over the last 24 hours, with bank stocks stabilising on both sides of the Atlantic,’ analysts at Deutsche Bank commented.

‘[However] the concerns haven’t gone away though, as while Credit Suisse saw its equity price increase, its bonds/[credit default swaps] were generally flat to weaker.’

In early trade in Zurich on Friday, Credit Suisse added another 1.2%. It had risen 19% on Thursday, reversing some of Wednesday’s 24% share price slump.

Oil prices, which also suffered this week, were on the up. Brent oil was quoted at $75.30 a barrel early Friday in London, rising from $74.21 late on Thursday.

Rising crude prices supported BP and Shell shares. The oil majors rose 4.2% and 3.5%, among the FTSE 100’s best performers.

BP’s shares rose despite, a US federal investigation finding that a BP subsidiary violated workplace safety practices, leading to the deaths of two workers.

The investigation concerns an incident that caused fatal burns to two workers in an Oregon, Ohio refinery’s crude unit, operated by BP Products North America. The regulator proposed a fine of $156,250.

BT fell 1.0%, the worst large-cap performer in London. UK regulator Ofcom said it will take longer than initially planned to provide a final decision on a broadband plan by BT’s Openreach arm.

Ofcom said it will need two extra months for its final decision, having initially expected to make one by the end of this month.

‘The Equinox 2 offer is due to launch on 1 April 2023. To provide certainty and stability for industry, our view is that it would not be appropriate for the offer to launch until we issue our final decision,’ Ofcom said. ‘We are considering issuing a direction to Openreach, using our powers under the Communications Act 2003, to achieve this, unless Openreach voluntarily defers the launch of the offer.’

Ofcom also made reference to an interview with the Financial Times in which BT Chief Executive Philip Jansen said the Openreach networking division is shaping up to be an ‘unstoppable machine’ and its success may mean it ends in ‘tears’ for fibre rivals.

In February, Ofcom gave the broadband plan, called Equinox 2, early backing, provisionally considering it to be ‘not anti-competitive’.

Among mid-caps, Bodycote surged 7.0%. The heat treatments and specialist thermal processing services provider reported annual earnings growth, hailing its ability to pass ‘inflationary impacts to its customers’.

Revenue rose 21% to £743.6 million in 2022 from £615.8 million in 2021. Pretax profit surged 23% to £95.3 million from £77.5 million.

Bodycote’s revenue beat market consensus of £717.2 million, according to Investec and Shore Capital.

Looking to 2023, Bodycote said: ‘While there are near-term macroeconomic uncertainties, we expect underlying volume to continue to grow ahead of the background markets, and margins are expected to expand as surcharges moderate.’

On AIM, Emis gave back 2.0% after the UK’s competition watchdog took aim at its £1.2 billion takeover by New York-listed UnitedHealth.

The acquisition of the healthcare software producer ‘could reduce competition leading to worse outcomes for the NHS and ultimately patients and UK taxpayers’, the Competition & Markets Authority said.

As part of its phase 1 probe, the CMA found competition in the fields of population health management and medicines optimisation software would be hurt by the deal. Both Emis and UnitedHealth-owned Optum provide software services to GPs in the UK.

Emis and UnitedHealth have until next week Friday to offer proposals to remedy the CMA’s concerns.

Emis said: ‘Given the CMA’s procedure for considering and accepting undertakings, Emis expects to be able to provide a further update on or around 31 March 2023, which is the statutory deadline for the CMA to determine whether the undertakings in lieu of a Phase 2 reference are acceptable in principle.’

Gold was quoted at $1,928.00 an ounce on Friday morning, up from $1,918.22 at the London equities close on Thursday.

Away from banking sector turmoil, eurozone inflation figures, due at 1000 GMT, will be in focus in light of the European Central Bank’s decision on Thursday to stick to the script and lift interest rates by 50 basis points.

ECB President Christine Lagarde implied there is still work to be done in the fight against inflation, but offered little in the way of forward guidance.

Lloyds Bank commented about the ECB: ‘Its previous signal to increase interest rates further was replaced with a conditional set of criteria, but the move nevertheless suggests that policymakers are still minded to tighten if market tensions ease and underlying inflation remains elevated.’

Added Swissquote analyst Ipek Ozkardeskaya: ‘The opening sentence of ECB Chief Christine Lagarde’s speech was that the bank predicts ’inflation to remain too high for too long’. And indeed, the final [consumer price index] data due out today is expected to confirm a February inflation at around 8.5% - which is high, but not bad compared to double-digit levels printed a couple of months earlier, but core inflation is now at record, and it needs to be addressed.’

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Issue Date: 17 Mar 2023