US futures up, inflation still high, which puts the Fed in place

US futures up, inflation still high, which puts the Fed in place
US futures up, inflation still high, which puts the Fed in place

A person wearing a protective mask walks past an electronic stock board showing Japan’s Nikkei 225 and NY Dow indices at a securities firm Tuesday, March 14, 2023, in Tokyo. Asian shares fell on Tuesday, as investors around the world continued to be rattled by worries about what will break next, following the second and third largest bank failures in US history. (AP Photo/Eugene Hoshiko)

By JOE McDONALD (AP Business Writer)

BEIJING (AP) – Asian stock markets rallied Wednesday after Wall Street steadied after sharp falls in bank stocks and U.S. inflation eased but remained high.

Shanghai, Tokyo, Hong Kong and Sydney advanced. Oil prices recovered some of the previous day’s heavy losses.

Wall Street’s benchmark S&P 500 edged higher on Tuesday as bank stocks recovered some of their losses caused by concerns that customers may withdraw deposits following the collapse of two US lenders.

Stocks rose despite inflation data that showed prices rose 6% from a year earlier in February, down from the previous month’s 6.4% but still well above the Federal Reserve’s 2% target. Investors were concerned that the Federal Reserve could respond to sustained upward pressure on prices by increasing the pace of rate hikes.

“The entrenchment of less hawkish expectations provided a catalyst for risk sentiment to recover,” IG’s Yeap Jun Rong said in a report. “There were also no new negative headlines from another bank or fund in trouble, allowing investor sentiment to settle.”

Unrest in the market about more rate hikes to curb economic activity and inflation was temporarily overshadowed by anxiety about the US financial system after the collapse of Silicon Valley Bank on Friday and Signature Bank on Sunday. President Joe Biden and regulators tried to ensure that the public risks were limited and that deposits in other banks were safe.

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Tuesday’s data showed that core inflation, with volatile energy and food prices stripped out to show a clearer trend, was 0.5% in February compared with the previous month, up from January’s 0.4% rise. The Fed is keeping a close eye on core inflation in monetary policy.

Signs of sustained upward pressure on rates usually raise expectations of more rate hikes, but the Fed faces a dilemma over how to respond to stress on the banking system. Many are under pressure after the fastest pace of rate hikes in a decade hammered the prices of their assets.

The Shanghai Composite Index rose 0.6% to 3,263.83 and the Nikkei 225 in Tokyo rose 0.3% to 27,306.80. Hong Kong’s Hang Seng jumped 2.4% to 19,698.77.

The Kospi in Seoul rose 1.9% to 2,393.60 and Sydney’s S&P-ASX 200 gained 0.4% to 7,033.70. New Zealand, Singapore and Jakarta advanced while Bangkok declined.

Traders rushed Monday to bet the Fed could hold interest rates steady at its next meeting, rather than accelerate to a 0.50 percentage point hike, double last month’s margin, according to CME Group data.

On Wall Street, the S&P 500 rose 1.7% to 3,920.56, reversing a three-day losing streak.

The Dow Jones Industrial Average rose 1.1% to 32,155.40. The Nasdaq rose 2.1% to 11,428.15.

First Republic Bank jumped 27% after plunging 67.5% over the previous three days. KeyCorp rose 6.9%, Zions Bancorp. rose 4.5% and Charles Schwab rose 9.2%.

The yield on a two-year Treasury note, or the difference between the market price and the payout at maturity, climbed back to 4.21% from 4.02% late Monday, another big move. The yield on the 10-year Treasury jumped to 3.66% from 3.55%.

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In energy markets, benchmark U.S. crude rose 92 cents to $72.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $3.47 on Tuesday to $71.33. Brent crude, the benchmark for international oil trading, rose 89 cents to $78.34 a barrel in London. It lost $3.32 the previous day to $77.45.

The dollar fell to 134.09 yen from Tuesday’s 134.19 yen. The euro rose to $1.0754 from $1.0741.

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