By Ankur Banerjee
SINGAPORE, March 15 (Reuters) - Asian equities rose
sharply on Wednesday, tracking a relief rally on Wall Street and
as U.S. inflation data delivered no nasty surprises, reinforcing
hopes the Federal Reserve will likely go for a smaller rate hike
when it meets next week.
Investors piled back into stocks in U.S. markets overnight
as fears about 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 was 1.44% higher, having slid 1.7% on Tuesday
after SVB's collapse triggered heavy selling by investors in the
last few trading sessions.
Australia's S&P/ASX 200 index rose 0.33% in early
trading, while Japan's Nikkei was mostly flat.
Chinese shares were 0.46% higher, while Hong Kong's
Hang Seng index rose 1.4%.
Data on Wednesday showed China's industrial output in the
first two months of 2023 rose 2.4% from the year earlier,
accelerating from a 1.3% annual rise seen in December. The data
slightly missed forecasts for a 2.6% rise in a Reuters poll of
analysts.
"It's clearly dominated by a relief rally rather than any
inflation angst," said Robert Carnell, regional head of
research, Asia Pacific at ING.
"I suppose what we've got is the banking sector in the U.S.
returning to stability, with depositors being given the fairly
clear signal that they're not going to lose out."
Investors were also relieved after February's U.S. inflation
report on Tuesday showed consumer prices rising by 0.4%, with a
year-on-year gain of 6% - in line with analyst expectations, as
there were worries that stronger than expected data might lead
the Fed to go for jumbo-sized hikes to battle inflation.
As recently as last week, markets were braced for the return
of large Fed hikes but the swift collapse of SVB has changed
those expectations, with market pricing in an 80% chance of a 25
basis point hike next week. "It does feel like the 50 basis point move for this month's
meeting that was speculated about especially after Powell's
commentary to the Senate Banking Committee. Nobody's expecting
that anymore," said Carnell.
U.S. Treasury yields extended gains into Asian hours after
sharp declines at the start of the week. The yield on 10-year
Treasury notes was up 3.8 basis points to 3.674%.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 6.9 basis
points at 4.294%, but far off last week's peak of 5.084%.
In the currency market, the greenback held steady, with the
dollar index , which measures the U.S. currency against
six rivals, at 103.64, with the euro unchanged at
$1.0732.
The Japanese yen weakened 0.08% to 134.30 per
dollar, while sterling was last trading at $1.2157,
down 0.01% on the day.
U.S. crude rose 1.07% to $72.09 per barrel and Brent was at $78.16, up 0.92% on the day.
Gold prices were on edge, with spot gold adding 0.1%
to $1,904.11 an ounce.
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(Editing by Sam Holmes)
Twitter: @AnkurBanerjee17;))
