Asian stocks climbed Wednesday as investors wagered that the worst of the global fallout from the American banking sector has passed.
(Bloomberg) — Asian stocks climbed Wednesday as investors wagered that the worst of the global fallout from the American banking sector has passed.
Shares rose in Japan, South Korea and Australia while stock futures for Hong Kong gained more than 1%. Declines across the region on Tuesday saw a gauge of Asian shares drop to the lowest since November.
US stocks rallied into the close, helping set the tone for a shift in sentiment Wednesday. The tech-heavy Nasdaq 100 notched its biggest one-day gain since early February.
A gauge of dollar strength rose slightly after four-straight days of declines.
Bond yields climbed in Australia and New Zealand as the Asian trading day got underway. The two-year Treasury yield nudged six basis points higher following a 27 basis point recovery in the rate on Tuesday. It still remains well below levels of mid last week after its biggest three-day slump in decades.
Swaps pricing is back to positioning for the Federal Reserve to lift rates by a quarter percentage point next week after the odds of an increase had slipped to nearly 50-50 on Monday. The closely-watched core consumer price index increased 0.5% in February, slightly ahead of the median estimate of 0.4% and enough to keep pressure on policy makers to hike rates.
“Overall, this is an inflation update that, taken as a sole input, would suggest that a 25 bp hike next week is a foregone conclusion,” said Ian Lyngen, rates strategist at BMO Capital Markets. “Alas, the regional banking stress leaves next week’s decision as a wild card until there is greater clarity on the success of limiting the contagion to the rest of the banking sector from SVB/Signature.”
Still, remarks from ratings companies on the financial sector underscored that sentiment is likely to remain fragile after the biggest American bank failures since the financial crisis.
Moody’s Investors Service cut its outlook on the sector on the heels of the trio of banking collapses over the past few days. First Republic Bank triggered a volatility halt after S&P Global Ratings placed the company on watch negative.
“Policymakers may still feel forced to press pause on rates, despite evidence the hot inflation is still a risk, unwilling to be blamed for making a bad situation worse,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “While smaller banks remain under pressure, there are concerns that bigger banks could become more risk averse in lending, which could dip the economy into a sharper downturn.”
Elsewhere in markets, oil rose early in Asia after extending declines in the previous session. Gold was little changed, having slid Tuesday after rising in the three previous sessions as traders turned to haven assets.
Focus in Asia on Wednesday will also turn to China and the release of a slew of economic data. Industrial output and retail sales are expected to have picked up as China emerged from Covid Zero, according to Bloomberg Economics wrote. The central bank is projected to keep its one-year medium term lending facility rate on hold at 2.75%.
Key events this week:
- China retail sales, industrial production, medium-term lending, surveyed jobless rate, Wednesday
- Eurozone industrial production, Wednesday
- US business inventories, retail sales, PPI, empire manufacturing, Wednesday
- Eurozone rate decision, Thursday
- US housing starts, initial jobless claims, Thursday
- Janet Yellen appears before the Senate Finance Committee, Thursday
- US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:03 a.m. Tokyo time. The S&P 500 rose 1.7% Tuesday
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 2.3% Tuesday
- Australia’s S&P/ASX 200 Index rose 0.8%
- Japan’s Topix rose 1%
- South Korea’s Kospi rose 1.2%
- Hang Seng Index futures rose 1.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0727
- The Japanese yen fell 0.2% to 134.45 per dollar
- The offshore yuan was little changed at 6.8828 per dollar
- The Australian dollar was little changed at $0.6685
Cryptocurrencies
- Bitcoin rose 0.5% to $24,750.91
- Ether was little changed at $1,705.63
Bonds
- The yield on 10-year Treasuries was little changed at 3.69%
- Australia’s 10-year yield advanced six basis points to 3.51%
Commodities
- West Texas Intermediate crude rose 0.7% to $71.82 a barrel
- Spot gold fell 0.1% to $1,902.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna and Cristin Flanagan.
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