“FEAR INDEX” DROPS
The US and European rally filtered through to Asia, where banks were among the big gainers with tech firms.
Hong Kong led the way, riding more than 2 per cent thanks to a bump in lenders HSBC and Standard Chartered as well as e-commerce titans Alibaba and JD.com.
Tokyo was also sharply higher as investors returned from a public holiday, while Seoul, Singapore, Sydney and Taipei were up by more than 1 per cent.
Shanghai, Wellington and Manila also rose.
National Australia Bank’s Rodrigo Catril said: “The reassurances and stability measures provided by authorities in recent days appear to be having an enduring positive effect.”
He pointed to the biggest two-day plunge this year in the VIX “fear index”.
“Markets are seemingly becoming more comfortable with the idea that authorities have probably done enough to prevent a systemic banking crisis. The improvement in risk appetite has also triggered a repricing of Fed and (European Central Bank) rate hike expectations.”
Eyes are now on the Fed’s rate decision later in the day, with analysts split over whether it will announce a 25 basis-point hike or pause in order to ease pressure on the banking system.
With the Fed’s game plan jolted by the recent turmoil, City Index’s Matt Simpson said the post-meeting news conference “could be the icing on the cake, as it is an opportunity for (Fed boss) Jerome Powell to finetune the message and reshape market expectations”.
“It is not uncommon to see markets reverse their direction at the press conference, and a key thing to look out for is how his tone compares to his recent testimony, which was very hawkish indeed.”
There was little movement in currency markets as traders bide their time ahead of the Fed decision, though the yen, sterling and euro held their recent gains against the dollar owing to the repricing of the US rates outlook.