Asian stocks gain as fears of quick Fed hikes and banking crisis fade

SINGAPORE, March 15 (Reuters) – Asian stocks rose sharply on Wednesday, following a relief rally on Wall Street and as U.S. inflation data delivered no nasty surprises, bolstering hopes the Federal Reserve will opt likely for a smaller rate hike when it meets next week .

Investors turned to equities in US markets overnight as fears of contagion in the banking sector following the collapse of Silicon Valley Bank (SVB) last week eased.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 1.44%, after slipping 1.7% on Tuesday after the collapse of SVB triggered strong selling by the investors during the last trading sessions.

Australia’s S&P/ASX 200 Index (.AXJO) rose 0.33% in early trading, while Japan’s Nikkei (.N225) was virtually flat.

Chinese stocks (.SSEC) rose 0.46%, while Hong Kong’s Hang Seng Index (.HSI) rose 1.4%.

Data on Wednesday showed China’s industrial production in the first two months of 2023 rose 2.4% from a year earlier, accelerating from the 1.3% annual rise. observed in December. The data slightly missed forecasts of a 2.6% rise in a Reuters poll of analysts.

“It’s clearly dominated by a relief rally rather than inflationary angst,” said Robert Carnell, regional research manager, Asia-Pacific at ING.

“I guess what we have is a return to stability in the US banking sector, with depositors getting a pretty clear signal that they won’t be losing out.”

Investors were also relieved after the US inflation report for February showed consumer prices rose 0.4% on Tuesday, with an annual gain of 6% – in line with analysts’ expectations, as feared that stronger-than-expected data could lead the Fed to make giant hikes to fight inflation.

As recently as last week, markets were bracing for a return of major Fed hikes, but the rapid collapse of SVB has changed those expectations, with market prices having an 80% chance of a 25-point hike. basic next week.

“It looks like the 50 basis point move for this month’s meeting that has been the subject of speculation, especially after Powell’s comment to the Senate Banking Committee. Nobody expects that anymore,” Carnell said.

US Treasury yields extended their gains into Asian hours after steep declines earlier in the week. The yield on 10-year Treasury bills rose 3.8 basis points to 3.674%.

The two-year US Treasury yield, which generally moves in line with interest rate expectations, rose 6.9 basis points to 4.294%, but off the week’s high of 5.084% last.

In the currency market, the greenback was flat, with the dollar index, which measures the US currency against six rivals, at 103.64, with the euro unchanged at $1.0732.

The Japanese yen weakened 0.08% to 134.30 to the dollar, while the pound last traded at $1.2157, down 0.01% on the day.

U.S. crude rose 1.07% to $72.09 a barrel and Brent to $78.16, up 0.92% on the day.

Gold prices were on the edge, with spot gold adding 0.1% to $1,904.11 an ounce.

Editing by Sam Holmes

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