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Asian Stocks See Growth, but Limited by Bank Concerns and Uncertainty Surrounding the Fed

Asian Stocks See Modest Rise Amid Bank Sector Concerns and Fed Uncertainty

On Tuesday, most Asian stocks witnessed a rise, following regulatory measures to stabilize the banking sector that somewhat reassured investors. However, concerns about potential worsening conditions and uncertainty before a Federal Reserve meeting kept gains limited. Trading volumes were also limited for the day due to a Japanese market holiday.

Despite the prior week’s steep losses due to fears of a US and European bank crisis, sentiment improved somewhat as US regulators rolled out more liquidity measures to protect bank deposits. Additionally, European regulators brokered a merger between UBS Group and beleaguered lender Credit Suisse Group.

Bank-heavy bourses saw the most significant rise for the day, with Australia’s ASX 200 index up 1.1% on strong gains in the country’s big four banks. However, the benchmark index was still down over 2% in the past week.

Meanwhile, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes added 0.4% and 0.2%, respectively. Philippine stocks led gains across risk-heavy Southeast Asian markets with a 0.8% bounce.

Technology-heavy indexes were cautiously higher, with the Taiwan Weighted index up 0.5%, while Hong Kong’s Hang Seng index added 0.4%. In early trade, India’s Nifty 50 and BSE Sensex 30 indexes rose about 0.3% and 0.4%, respectively.

Despite the positive overnight session on Wall Street that provided similar cues to Asian markets for the day, sentiment remained on edge ahead of a pivotal Federal Reserve decision on Wednesday. The central bank is widely expected to hike rates by 25 basis points, but its stance on future monetary policy will be closely watched. Markets bet that the Fed will soften its hawkish stance to prevent more pressure on the banking sector. However, uncertainty over the path of monetary policy remains, given that US inflation is trending well above the Fed’s target range.

While US regulators acted quickly to prevent a broader banking collapse, concerns also remained about smaller lenders in the country with large uninsured deposits. On Monday, shares of First Republic Bank were dumped to record lows following this notion.

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