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Markets bet on less hawkish Fed as bank rout eases, leading to a rise in Asian stocks.

On Wednesday, most Asian stock markets experienced a rise in their indices, largely thanks to the recovery in bank shares and reduced fears over the potential crisis in the United States. Moreover, growing bets that the Federal Reserve will adopt a less hawkish stance also helped improve market sentiment.

Following an overnight recovery on Wall Street, where consumer inflation data matched expectations for February, regional markets gained positive momentum. Investors are betting that the Federal Reserve will have limited room to hike interest rates due to the recent pressure on the banking sector. This positive outlook was led by technology-heavy bourses such as Hong Kong's Hang Seng index and South Korea's KOSPI, which saw increases of more than 1% each.


The Shanghai Shenzhen CSI 300 and Shanghai Composite indexes in China rose by 0.4% and 0.7%, respectively, as mixed economic data showed a slow but steady recovery in China's economy. Industrial production in China rose slightly less than expected in February, while retail sales and fixed asset investment bounced back from pandemic-era lows. Such data drove optimism for Asia's largest economy, which withdrew most anti-COVID measures earlier this year.


In India, the Nifty 50 and BSE Sensex 30 indexes each added about 0.6% after a softer-than-expected wholesale inflation reading for February raised hopes for easing price pressures in the country.


Broader Asian markets experienced growth after fears of a potential banking crisis in the United States were alleviated, with the government intervening in the sector to protect depositors following the collapse of Silicon Valley Bank and two other regional players.


In Japan, the Nikkei 225 index rose 0.2%, as major bank stocks recovered, while in Australia, the ASX 200 index added 0.7% on the back of a recovery in the country's big four banks. Additionally, Australian mining stocks were supported by the prospect of a Chinese economic recovery. Thailand's SET Index saw the highest gains across Southeast Asia with a 2.2% bounce.


Although traders are still positioning for a 25 basis point hike by the Federal Reserve next week, rising interest rates are expected to limit any major gains in Asian stocks this year as they limit capital flows to the region.


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