By Ankur Banerjee
SINGAPORE, March 15 (Reuters) - Asian equities rose on
Wednesday, tracking a relief rally on Wall Street after 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 eased about contagion in the banking sector following
the collapse of Silicon Valley Bank (SVB) last week.
MSCI's broadest index of Asia-Pacific shares outside Japan was 1% higher, having slid 1.7% on Tuesday after
SVB's collapse triggered heavy selling by investors in the last
few trading sessions.
The rally is unlikely to continue in Europe with European
stock futures indicating a lower open. Eurostoxx 50 futures were down 0.07%, German DAX futures up 0.01%
and FTSE futures down 0.04%.
"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 rose 0.4%, with a
year-on-year gain of 6% - in line with analyst expectations.
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.
Also, helping boost sentiment was data on China's economic
activity that picked up in the first two months of the year due
to a recovery in consumption and infrastructure investment and
signs the beleaguered property sector is starting to recover.
Chinese shares gained with Shanghai Composite Index 0.46% higher, while Hong Kong's Hang Seng index up
1.75%1.4%.
Australia's S&P/ASX 200 index rose 0.86%, while
Japan's Nikkei was flat.
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 2.1 basis points to 3.657%. .
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 7.1 basis
points at 4.296%, 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 103.69, with the euro mostly flat at
$1.0737.
The Japanese yen weakened 0.4% to 134.75 per
dollar, while sterling was last trading at $1.2156,
down 0.03% on the day.
Oil prices rebounded more than 1% on Wednesday due to a
stronger OPEC outlook on China's demand. Brent crude futures climbed 1.2% to $78.38 a barrel. U.S. West Texas
Intermediate crude futures (WTI) gained 1.4% to $72.29 a
barrel. On Tuesday, the benchmarks fell more than 4% to
three-month lows.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates YTD Global asset performance Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Sam Holmes and Sonali Paul)
Twitter: @AnkurBanerjee17;))
