BANGKOK (AP) – Asian stocks rose on Wednesday after a rally on Wall Street led by banks hardest hit by the industry’s crisis.
Oil prices fell, while US futures remained virtually unchanged.
Investors are awaiting the Federal Reserve’s interest rate decision, which is expected to loosen its efforts to curb inflation given the recent turmoil that has gripped the banking sector. Some of Wall Street’s fears dissipated after US Treasury Secretary Janet Yellen said the government could offer the banking industry more bailouts if needed.
Most economists expect the Fed to announce a relatively modest quarter-point hike in its base rate, the ninth hike since March last year.
Markets around the world fell sharply this month on fears that the banking system could crack under the pressure of the fastest hike in interest rates in decades. This week’s rally is now facing a major test by the Fed’s decision.
In Asian trading, the Tokyo Nikkei 225 rose 1.9% to 27,466.61 points, rebounding after the market was closed for a holiday on Tuesday. Hong Kong’s Hang Seng rose 1.9% to 19,631.80, while the Shanghai Composite added 0.2% to 3,261.14.
The Australian S&P/ASX 200 jumped 0.9% to 7015.60. Kospi in South Korea rose 1.2% to 2417.14.
On Wall Street, the S&P 500 rose 1.3% on Tuesday, marking its first consecutive gain since Silicon Valley Bank’s meteoric collapse began two weeks ago. It closed at 4002.87.
The Dow Jones Industrial Average rose 1% to 32,560.60, while the Nasdaq Composite Index jumped 1.6% to 11,860.11.
Yellen told a group of bankers that “more government bailouts may be needed” if there are risks that could bring down the system. This could mean that customers of a weakened bank will get all their money, even those with a limit in excess of $250,000 insured by the Federal Deposit Insurance Corporation.
“Janet Yellen came out and said that if other fields need protection, they are willing and able to do so, I think that is a very strong statement,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. “And so the markets were able to calm down.”
The story goes on
Earlier this month, the US government said it would make all Silicon Valley Bank and Signature Bank depositors whole. These were the second and third largest US bank failures in history.
These banks ran into trouble as depositors rushed to withdraw their money en masse. Such raids can cause the bank to fail, and since then, investors have been on the hunt for the next bank to fail. Much attention was paid to the First Republic bank, which is somewhat similar to the Silicon Valley bank. Its shares lost 90% in the month to Monday but jumped 29.5% on Tuesday.
Other small and medium-sized banks also rose, including a 9.1% rise for Comerica and a 9.3% jump for KeyCorp.
Hopes for the banking industry began to change over the weekend after regulators merged two huge Swiss banks. Shares in both banks rose Tuesday in Switzerland, with acquirer UBS up 12.1%. Shares of Credit Suisse, meanwhile, rose 7.3% after falling a day earlier.
Central banks have raised rates sharply in hopes of bringing high inflation under control. Higher rates slow down the economy, raising the risk of a recession and lowering the price of stocks and other investments.
Earlier this month, most of Wall Street expected the Fed to speed up the hike again and raise rates by 0.50 percentage points on Wednesday after reports on the labor market, retail sales and inflation turned out to be hotter than expected. Now traders are starting to bet that the Fed might even cut interest rates later this year.
Elsewhere on Wednesday, US benchmark crude lost 64 cents to $69.03 a barrel in electronic trading on the New York Mercantile Exchange. It jumped $1.85 to $69.67 on Tuesday.
Brent crude, the mainstay of oil pricing worldwide, fell 73 cents to $74.59 a barrel.
The dollar fell to 132.40 Japanese yen from 132.47 yen. The euro rose to $1.0772 from $1.0770.