(Alliance News) - Stocks in London are called to open higher on Friday, amid moves from US policymakers to calm banking sector fears.

A tumultuous week has seen banking shares sold off in light of the Silicon Valley Bank collapse and liquidity worries at Credit Suisse. Shares mounted a recovery on Thursday and are set for a decent open on Friday but are still on track for a weekly loss.

IG says futures indicate the FTSE 100 index of large-caps to open 45.2 points higher, 0.6%, at 7,455.23 on Friday. It had closed up 65.58 points, or 0.9% at 7,410.03 on Thursday. The FTSE 100 has lost 4.4% so far this week.

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 was 0.4% higher in late trade, while the Hang Seng in Hong Kong was up 1.1%.

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%.

"After the opening cash catch-up to US markets, it turned into a relatively normal day here in Asia stocks so far. The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right," SPI Asset Management analyst Stephen Innes commented.

"Granted, there is still a considerable element of headline risk, especially over the weekend when traders can't react, which could again upset the proverbial apple cart on Monday morning open. Not to mention, the uncertainty around the Fed policy reaction function is keeping rates volatility elevated."

The Federal Reserve has lent US banks nearly USD12 billion under a new one-year lending program 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 USD11.9 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 USD30 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, Citi 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.

Away from banking sector turmoil, eurozone inflation figures will be in focus at 1000 GMT on Friday, in light on the European Central Bank's decision to stick to the script and lift 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.

The pound was quoted at USD1.2151 early Friday, up from USD1.2110 late Thursday. The euro stood at USD1.0648, higher against USD1.0619. Against the yen, the dollar was trading at JPY133.04, flat against JPY133.09.

Brent oil was quoted at USD74.92 a barrel early Friday in London, rising from USD74.21 on Thursday. Gold was quoted at USD1,930.60 an ounce, up from USD1,918.22.

By Eric Cunha, Alliance News news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.