BEIJING (`) – Asian stock markets rallied on Wednesday after Wall Street stabilized after sharp declines in bank stocks and US inflation eased but remained elevated.
Shanghai, Tokyo, Hong Kong and Sydney have made progress. Oil prices recouped some of the previous day’s sharp losses.
Wall Street’s benchmark S&P 500 index rose on Tuesday as bank stocks recouped some of their losses caused by concerns customers could withdraw deposits after the collapse of two US lenders.
Shares rose despite inflation data that showed prices rose 6% year-on-year in February, down from the previous month’s 6.4% but still well above the Federal Reserve’s 2% target. Investors had feared the Federal Reserve might respond to the ongoing upward pressure on prices by accelerating the pace of interest rate hikes.
“Anchoring less hawkish expectations has been somewhat of a catalyst for risk sentiment recovery,” IG’s Yeap Jun Rong said in a report. “There was also no new negative headline news about another bank or fund in trouble, giving investors some peace of mind.”
Market jitters about further rate hikes to dampen activity and inflation were temporarily overshadowed by worries about the US financial system following Friday’s collapse of Silicon Valley Bank and Sunday’s Signature Bank. President Joe Biden and regulators sought to ensure public risks were contained and deposits at other banks were safe.
Tuesday’s data showed that core inflation, which excludes volatile energy and food prices to show a clearer trend, came in at 0.5% mom in February, up slightly from January’s 0.4% gain . The Fed pays close attention to core inflation when setting monetary policy.
Signs of continued upward pressure on prices usually contribute to expectations of further rate hikes, but the Fed faces a dilemma on how to respond to the pressure on the banking system. Many are under pressure after the fastest rate hikes in a decade pushed down asset prices.
The Shanghai Composite Index rose 0.6% to 3,263.83 and Tokyo’s Nikkei 225 rose 0.3% to 27,306.80. Hong Kong’s Hang Seng rose 2.4% to 19,698.77.
Seoul’s Kospi rose 1.9% to 2,393.60 and Sydney’s S&P-ASX 200 gained 0.4% to 7,033.70. New Zealand, Singapore and Jakarta advanced while Bangkok declined.
Traders on Monday rushed to place bets that the Fed could hold rates steady at its next meeting rather than accelerate to a 0.50 percentage point hike, double last month’s margin, according to data from CME Group.
On Wall Street, the S&P 500 rose 1.7% to 3,920.56, reversing a three-day streak of declines.
The Dow Jones Industrial Average rose 1.1% to 32,155.40. The Nasdaq rose 2.1% to 11,428.15.
First Republic Bank rose 27% after falling 67.5% in the previous three days. KeyCorp was up 6.9%, Zions Bancorp was up 4.5%, and Charles Schwab was up 9.2%.
The yield on a two-year government bond, or the difference between the market price and the payout at maturity, rose back to 4.21% from 4.02% late Monday, another big move. The yield on the 10-year government bond rose to 3.66% from 3.55%.
In energy markets, the reference price for US crude rose 92 cents to $72.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $3.47 to $71.33 on Tuesday. Brent crude, the price basis for international oil trading, rose 89 cents to $78.34 a barrel in London. The day before, it lost $3.32 to $77.45.
The dollar fell to 134.09 yen from 134.19 yen on Tuesday. The euro rose to $1.0754 from $1.0741.
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