Australia

Australian shares are positioned to gain today after bank stocks rallied on Tuesday. Hopes that regulators will contain the banking sector turmoil lifted US stocks higher.

ASX futures had risen 66 points 0.94% as of 7:00am on Wednesday, indicating a climb at the open.

Increased investor optimism about the banking system helped lift US stocks Tuesday, with shares of regional banks including First Republic at the forefront of the rally.

Buoyed in part by reassuring comments by global financial authorities, both the S&P 500 and the Dow Jones Industrial Average posted their second straight day of gains for the first time since Silicon Valley Bank collapsed less than two weeks ago.

The S&P 500 gained 1.3%, the Dow Jones Industrial Average rose 1.0% and the tech-focused Nasdaq Composite climbed 1.6%.

The indices advanced ahead of Wednesday's interest rate decision from the Fed. Investors are uncertain about what the Fed will do as it attempts to balance financial strains against stubbornly high inflation.

In commodity markets, Brent crude oil gained 1.9% to $US75.18 a barrel while gold advanced 2.1% to US$1,937.58.

Australian government bonds leaned lower, as the 2 Year yield declined to 2.83% and the 10 Year dipped to 3.18%. US Treasury notes also lost, with the 2 Year yield down to 4.15% and the 10 Year sliding to 3.59%.

The Australian dollar backtracked to 66.58 US cents from its previous close of 67.15. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, nudged higher to 96.75.

Asia

Chinese stocks ended higher, extending their morning gains in a sign of recovery after the market's recent muted trading pattern. The benchmark Shanghai Composite Index ended up 0.6% at 3255.65, while the Shenzhen Composite Index jumped 1.6% to settle at 2085.98. The tech-heavy ChiNext Price Index was the best performer, rising 2.0% to 2337.26. Consumer goods and services sectors, including healthcare providers, e-commerce companies and education firms, led gains. Many analysts are expecting an imminent rebound in A-shares, which have suffered a broad downturn since late January as enthusiasm about China's reopening cooled. But analysts reckon the recent selloff has likely priced in most risk factors and earnings recovery momentum should help stocks re-rate.

Hong Kong's Hang Seng Index rose 1.4% to close at 19258.76, tracking a recovery in U.S. stocks. Asian markets are simply taking Wall Street's lead, even if concerns about contagion aren't fully removed, said Matt Simpson, market analyst at City Index and Forex.com, in an email. Anta Sports Products led gains on the HSI, climbing 9.2% after it posted higher revenue for 2022. Wuxi Biologics rose 8.9%, Chow Tai Fook Jewelry Group gained 6.4% and Li Ning was up 5.7%. The Hang Seng Tech Index closed 2.45% higher at 3965.17.

The Tokyo Stock Exchange was closed Tuesday to celebrate the Vernal Equinox.

India's Sensex gained 445.73 points to close above the 58000 level for the first time since March 13. Banks and other financial stocks lifted the index higher as investors weighed the joint action by global central banks to boost liquidity. Reliance Industries added 3.1%, Bajaj Finance gained 2.9% and Axis bank rose 2.1%. Among decliners, Hindustan Unilever and Tech Mahindra shed 1.9% and 1.2%, respectively. The Sensex closed 0.8% higher at 58074.68.

Europe

European stocks rose Tuesday as bank shares recovered from recent losses. The pan-European Stoxx Europe 600 gained 1.5%, the German DAX rose 1.8% and the French CAC 40 added 1.4%. European bank shares led the Stoxx index higher.

In the United Kingdom, the FTSE 100 closed up 1.8%, with bank stocks rising and fears of a full-blown crisis receding, AJ Bell head of financial analysis Danni Hewson said in a note. "London's FTSE 100 enjoyed its best rally of the year so far, closing up almost 2% buoyed by gains from high street banking stalwarts NatWest, Barclays and Lloyds," Hewson said. Rolls-Royce Holdings ended the day as the biggest gainer, up 6.4%, while Fresnillo was the biggest faller, ending down 3.9%.

"Today's rebound in the banks appears to suggest we may have found a short-term base, as confidence slowly returns after the volatility of the last few days and yields rebound," CMC Markets analyst Michael Hewson wrote.

North America

Increased investor optimism about the banking system helped lift US stocks Tuesday, with shares of regional banks including First Republic at the forefront of the rally.

Buoyed in part by reassuring comments by global financial authorities, both the S&P 500 and the Dow Jones Industrial Average posted their second straight day of gains for the first time since Silicon Valley Bank collapsed less than two weeks ago.

The S&P 500 gained 1.3%, the Dow Jones Industrial Average rose 1.0% and the tech-focused Nasdaq Composite climbed 1.6%.

The indices advanced ahead of Wednesday's interest rate decision from the Fed. Investors are uncertain about what the Fed will do as it attempts to balance financial strains against stubbornly high inflation.

Aiding Tuesday's rally, Treasury Secretary Janet Yellen said the government could step in to protect depositors at other banks if regulators see a risk of a run. Meanwhile, European regulators made attempts Monday to calm bond investors after a risky type of bank debt, known as additional tier 1 bonds, sold off sharply. The selloff came after Credit Suisse's AT1 bonds were wiped out as part of the troubled Swiss bank's hastily arranged sale to rival UBS.

"The equity market is not pricing in a full banking crisis," said Seema Shah, chief global strategist at Principal Asset Management. "There's not panic setting into that investor space, which is certainly a very important thing."

Shares in big US banks such as JPMorgan Chase posted strong gains, while some smaller lenders surged. First Republic stock jumped 29.5%, after shedding nearly half of its value Monday. Western Alliance and PacWest, two other midsize banks that have come under pressure, climbed 15.0% and 18.8%, respectively.

JPMorgan Chief Executive Jamie Dimon is leading discussions about new efforts to stabilize First Republic, The Wall Street Journal reported Monday. The bank has become a focus for investors worried that a flight of deposits from midsize banks could lead to a pullback in lending and drag on economic growth.

Some analysts have argued that the Fed might not raise rates on Wednesday to keep its focus on financial stability. Nevertheless, a growing consensus has emerged that the Fed will still raise rates by 0.25 percentage points.

Fed-funds futures show investors are now pricing in a roughly 83% chance that the central bank lifts interest rates by 0.25 percentage points for a second consecutive time, according to data from CME Group.

"I probably agree with consensus that they are likely going to hike 25 basis points tomorrow," said Blake Gwinn, head of US rates strategy at RBC Capital Markets. "I don't necessarily think it's the right option, but I just think...they really want to separate out the financial stability tool kit from the inflation fighting tool kit."

Some analysts have warned that Fed officials may be less concerned than investors that rate increases pose a serious threat to financial stability. If that becomes apparent on Wednesday, stocks could decline, given how expectations for looser monetary policy have recently helped buoy riskier assets, these analysts say.