Asian stocks rise as bank rout eases, markets bet on less hawkish Fed

By Ambar Warrick

Investing.com -- Most Asian stock markets rose on Wednesday, helped by a recovery in bank shares amid easing fears over a potential crisis in the U.S., while growing bets that the Federal Reserve will adopt a less hawkish stance also aided sentiment.

Regional markets took positive cues from an overnight recovery on Wall Street, after consumer inflation data read largely as expected for February. The data, coupled with recent pressure on the banking sector, spurred bets that the Fed will have limited room to hike interest rates.

Technology-heavy bourses gained the most, with Hong Kong’s Hang Seng index and South Korea’s KOSPI up more than 1% each on Wednesday. The two were also among the worst hit by a stock rout earlier this week.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes added 0.4% and 0.7%, respectively, as mixed economic data showed that a recovery in the country was gaining steam, albeit at a staggered pace.

Chinese industrial production rose slightly less than expected in February, while retail sales and fixed asset investment bounced back from pandemic-era lows. The readings drove some optimism over a recovery in Asia’s largest economy, after it withdrew most anti-COVID measures earlier this year.

India’s Nifty 50 and BSE Sensex 30 indexes added about 0.6% each, as a softer-than-expected wholesale inflation reading for February drove up optimism over easing price pressures in the country.

Broader Asian markets rose amid easing fears of a U.S. banking crisis, after the government intervened in the sector to protect depositors after the collapse of Silicon Valley Bank and two other regional players.

Japan’s Nikkei 225 index rose 0.2%, as major bank stocks recovered, while Australia’s ASX 200 index added 0.7% on a recovery in the country’s big four banks. Australian mining stocks were also supported by the prospect of a Chinese economic recovery.

Thailand’s SET Index led gains across Southeast Asia with a 2.2% bounce.

Markets are betting that growing pressure on lenders, coupled with signs that overall inflation eased in February, will elicit a less hawkish Fed in the coming months. But traders are still positioning for a 25 basis point hike by the Fed next week, as stubborn core inflation showed that price pressures still remained relatively elevated in the country.

Rising interest rates are expected to limit any major gains in Asian stocks this year, given that they limit capital flows to the region.