Asian shares rose sharply on Wednesday while the dollar was on the defensive as easing concerns over the banking sector revived risk appetite, while Alibaba‘s stock soared on the internet behemoth’s plans to split into six units. MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.82% higher, while Japan’s Nikkei advanced 0.49%.
Hong Kong’s Hang Seng index surged over 2%, buoyed by Alibaba after the Chinese e-commerce conglomerate announced its break-up plans. Alibaba’s Hong Kong shares shot up 15%, while the company’s U.S.-listed shares closed 14.3% higher.
The news lifted investor confidence in the wider Chinese tech sector, with shares of Alibaba’s e-commerce rival JD.com Inc 7% higher, and gaming giant Tencent Holdings Ltd jumping 5%.China’s CSI 300 benchmark edged up 0.4%.
Following weeks of volatility in the market after the unexpected failure of two U.S. banks and the rescue of Credit Suisse in Europe, investor nerves were calmed this week by the sale of assets in collapsed lender Silicon Valley Bank and no new signs of further stresses in the banking system.
“The lack of any substantive developments in the banking backdrop has seen markets relatively calm by the standards of recent weeks,” said Taylor Nugent, an economist at National Australia Bank.In the first congressional hearing into the collapse of the two U.S. regional lenders, lawmakers pressed the Federal Reserve’s top banking regulator on whether the central bank should have been more aggressive in its oversight of SVB.Michael Barr, the Fed’s vice chairman for supervision, criticized SVB for going months without a chief risk officer and how it modelled interest rate risk.
“Investors have not completely lost their anxiety … and hints of a big regulatory overhaul are likely to weigh on the sector until details emerge,” said Robert Carnell, regional head of research, Asia Pacific at ING.Overnight, a survey showed that U.S. consumer confidence unexpectedly increased in March despite recent financial market turmoil, but Americans continued to expect inflation to remain elevated over the next year.
Worries over inflation have prompted investors to recalculate what they expect the Fed to do in its next meeting in May.Markets are now pricing in a 51% chance of the Fed standing still on interest rates in its next meeting, down from 60% chance a day earlier, the CME FedWatch tool showed.
In the foreign exchange markets, the dollar index, which measures the U.S. currency against six peers, was mostly flat, having eased 0.3% overnight on improving risk appetite.The euro was up 0.01% to $1.0844, while sterling was last trading at $1.2334, down 0.05% on the day.
The Japanese yen weakened 0.56% to 131.63 per dollar, after rising 0.5% overnight.The Australian dollar fell 0.13% to $0.670 after inflation slowed to an eight-month low in February, thanks in part to a sharp retreat in holiday travel and accommodation.
“Together with yesterday’s softish retail sales figures, this will encourage thoughts of a pause from the Reserve Bank of Australia at their next meeting, and potentially that this tightening cycle might now be over,” said ING’s Carnell.
In the commodities market, oil prices gained for third straight day on improving market sentiment and as a halt to some exports from Iraqi Kurdistan raised concerns of tightening supply. U.S. crude rose 0.71% to $73.72 per barrel and Brent was at $79.00, up 0.45% on the day. Spot gold dropped 0.3% to $1,968.37 an ounce after rising 1% on Tuesday.