Asian markets extended gains on Wednesday, tracking a rally in New York, on optimism that the Federal Reserve’s plan to hike interest rates will help bring inflation under control.

While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen.

Fed boss Jerome Powell said on Monday that the central bank was prepared to act more aggressively on lifting borrowing costs if inflation – already at a 40-year high – does not fall quickly enough.

Officials lifted rates last week by a quarter of a point but some have advocated hikes of half a point, a view Powell suggested he was open to, adding that he was happy the economy was strong enough to withstand such a move. While the faster and steeper rate of hikes would make it costlier for investors to borrow, commentators said the Fed’s stance gave them confidence it could get a grip on prices.

“We are positive for equities for this year,” Seema Shah, of Principal Global Investors, told Bloomberg Television. She added that while the near-term outlook would be challenging with recession risks rising, “we still think the US economy is pretty good fundamentally”. “Faster hikes are clearly going to help inflation come down,” which may reduce the need for a longer tightening campaign. 

All three main indexes on Wall Street rallied on Tuesday, with the Nasdaq piling on two per cent. And Asia took up the baton, with Tokyo jumping three per cent and Hong Kong continuing to bask in a tech rally, fuelled by China’s pledge of support for markets, putting on more than one per cent. Shanghai, Seoul, Sydney, Singapore, Taipei, Manila and Bangkok were also on the front foot, though Mumbai, Jakarta and Wellington dipped. London opened with gains as data showed UK inflation hit a three-decade high in February, while Paris and Frankfurt were also up.

“The market appears to be unfazed by the risks that have haunted it for the first quarter and appear ready to grind higher with conviction,” said market strategist Louis Navellier. “It appears that the long-awaited reopening trade has finally begun in earnest, despite the baggage of Ukraine and surprisingly high inflation, and may soon draw in a lot of money off the sidelines.”

The market appears to be unfazed by the risks that have haunted it for the first quarter and appear ready to grind higher with conviction- Market strategist Louis Navellier

Still, investors continue to keep an eye on developments in the Ukraine war, which is keeping oil prices elevated though they remain stuck just below $120 a barrel.

“It’s a massive week for oil markets, with meetings of EU leaders and a NATO summit both happening over the next few days,” said Stephen Innes at SPI Asset Management. “A new wave of Russian sanctions is likely, and speculation in the press has focused on the probability of sanctions affecting oil.”