Asia stocks were boosted on Wednesday as worries over a global banking crisis eased but traders remain on edge ahead of a critical US Fed meeting later in the day.
There was a cautious bounce for bourses across the region with the Nikkei seeing its biggest jump in two months while China and Hong Kong stocks joined the overnight Wall Street rally.
Japan’s financial stocks led the Tokyo gains, with Nomura Holdings and Daiwa Securities each posting gains of about 4.5% as investors took heart from assurances by US Treasury Secretary Janet Yellen that deposits at smaller lenders will be safeguarded.
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Elsewhere, online company Rakuten Group surged nearly 6% after Reuters reported that the company plans an initial public offering of its banking arm as soon as next month.
A sharp weakening in the yen overnight also buoyed the overall market in Japan, with automakers getting a particular boost. Energy shares rallied amid strong gains in crude oil prices, while advances for US tech shares helped lift Japanese chip stocks.
The Nikkei rose 1.93%, or 520.94 points, to close at 27,466.61, its biggest gain since January 18. The broader Topix added 1.74% to 1,962.93.
China and Hong Kong stocks rallied for a second day after US banking stocks rebounded overnight on hopes that a banking sector meltdown has been averted for now.
China’s blue-chip CSI 300 Index was up 0.32%, while the Shanghai Composite Index climbed 0.31%, or 10.10 points, to 3,265.75. The Shenzhen Composite Index on China’s second exchange lifted 0.60%, or 12.46 points, to 2,098.44.
Hong Kong’s Hang Seng Index jumped 1.73%, or 332.67 points, to close at 19,591.43.%, while the Hang Seng China Enterprises Index gained 1.68%.
Hong Kong bank stocks rebounded. HSBC jumped 3.5%, Standard Chartered surged 4.8%.
Elsewhere across the region, Seoul, Singapore, Sydney and Taipei were up by more than 1%. Wellington and Manila also rose. MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.3%.
Overnight, strains were still evident among regional US banks with shares of First Republic Bank sliding on suggestions the government might be involved in a rescue deal, perhaps disadvantaging shareholders.
The unease left both S&P 500 futures and Nasdaq futures barely changed. EUROSTOXX 50 futures edged up 0.2%, while FTSE futures rose 0.1%.
The still brittle mood was evident in the latest Bank of America survey of global fund managers which found pessimism near its worst in the past 20 years amid fears of financial risk and a flight from bank stocks.
All of which puts the Fed in a tough position as it decides whether to raise interest rates later today.
An added complication is whether the Fed temporarily stops selling its holdings of Treasury debt, known as Quantitative Tightening, and what Fed members do with their dot plot forecasts for future rate hikes.
Bond investors will be hoping the Fed can instil some calm given the wild volatility of recent days. Two-year Treasury yields were hesitating at 4.13%, having made a remarkable round-trip from 5.085% to 3.635% in just nine sessions.
The dollar went the other way on the yen, where yields are still tightly controlled by the Bank of Japan, and rose to 132.40. Safe-haven demand for yen had seen the dollar as low as 130.55 early in the week.
In commodities, the mild improvement in risk sentiment saw gold fade back to $1,939 an ounce and away from Monday’s top around $2,009.
Oil prices eased after an industry report showed US crude inventories rose unexpectedly last week in a sign fuel demand may be weakening. Brent dipped 41 cents to $74.91 a barrel, while US crude fell 40 cents to $69.27.
Tokyo – Nikkei 225 > UP 1.93% at 27,466.61 (close)
Hong Kong – Hang Seng Index > UP 1.73% at 19,591.43 (close)
Shanghai – Composite > UP 0.31% at 3,265.75 (close)
London – FTSE 100 < DOWN 0.18% at 7,522.53 (0928 GMT)
New York – Dow > UP 0.98% at 32,560.60 (Tuesday close)
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