By Elizabeth Howcroft

LONDON, March 17 (Reuters) – European stock indices rose in early trading on Friday, extending the previous day’s rally, as fears of a banking crisis eased slightly after top U.S. policymakers and banks decided to bail out the First Republic Bank.

* In a crisis that began last Friday with the collapse of US-based Silicon Valley Bank, risk appetite plummeted earlier in the week as investors lost confidence in the country’s regional banks and Credit Suisse in Europe. The week ended with bond yields falling as investors lowered their expectations for future rate hikes.

* Global markets stabilized somewhat on Thursday, helped by Credit Suisse’s statement that it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank and, later in the day, l injection of $30,000 million in deposits by a group of major banks into First Republic Bank, a mid-sized US lender.

* Still, analysts say worries about a possible banking crisis are far from over.

* At 09:44 GMT, the MSCI World Equity Index, which tracks stocks from 47 countries, was up 0.4%. Europe’s STOXX 600 gained 0.7% but was still down 1.9% on the week, while London’s FTSE 100 rose 0.9%.

* The 2-year US Treasury yield, which is the most sensitive to changes in interest rate expectations, rose 2 basis points to 4.1384%, closer to Wednesday’s six-month low, 3 .72% than the high of 5.084% reached the previous one. week, which was its highest level since 2007.

* The European Central Bank raised rates by 50 basis points on Thursday, delivering on its promise to fight inflation even as some investors called for a pause in the rate hike cycle until the banking turmoil calm down.

* The central bank’s supervisory board met on Friday to discuss tensions and vulnerabilities in the eurozone banking sector.

* The benchmark 10-year German bond yield remained stable at around 2.255%, and yields on short-term eurozone government bonds rose.

* Markets are expecting a 25 basis point hike from the US Federal Reserve at its meeting next week, down from earlier expectations of a 50 basis point hike.

* The dollar index, which measures the performance of the greenback against a basket of six currencies, fell 0.3%. The pound rose by 0.2% and the euro by 0.3%.

* Oil prices also benefited from a resurgence in risk appetite, with Brent crude futures adding 1.2% and West Texas Intermediate crude futures gaining 1.5%, rebounding from a 20-year low over a year earlier in the week.

(Reporting by Elizabeth Howcroft; Editing in Spanish by Ricardo Figueroa)

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