Asia report: Markets rally as sentiment improves

Asian markets came out all guns blazing on Wednesday, trading off signs of improvement in the US economy, which helped to soothe traders' fears about weakness in the global economy.

The Shanghai Composite closed up 4.26%, after starting the day flat. That added to its 1.7% gains on Tuesday, which came in the wake of easing measures from the People's Bank earlier in the week.

Shares in China rose even after Moody's lowered its outlook on the country's credit rating to negative from stable, before the floors in Shanghai opened. Moody's blamed rising government debt and capital outflow concerns among the primary reason for the move.

Hopes for regulatory and financial reform were also growing, ahead of the country's parliamentary sessions which were slated to begin later in the week.

On top of that, some Chinese brokers had raised the discount rate for margin financing, allowing investors to borrow more money for the same price, to invest in stocks.

"[Authorities realise] that deleveraging efforts may have been overdone," said analyst Zhang Xin of Guotai Junan Securities, one of the brokers to have raised its discount rate.

Total margin debt dropped to its lowest point since December 2014 on Tuesday, to CNY 860.4bn, showing investors weren't as keen to borrow for their equities needs.

Meanwhile, the Chinese yuan weakened as Beijing guided it further away from the US dollar. It was trading at its lowest levels against the greenback since 3 February, and was last at CNY 6.5516 to the dollar.

The People's Bank had guided renminbi slightly stronger on Tuesday under the loose peg system, after the stimulus, which was in the form of a cut in the reserve requirement ratio at banks in the country.

Elsewhere, the Nikkei Stock Average closed up 4.11%, Hong Kong's Hang Seng was up 3.07% and the Kospi in Seoul was up 1.6%. Australia's S&P/ASX 200 gained 2.01% by close.

Australian shares rallied on positive data that showed the economy expanding more than expected in the fourth quarter of 2015. Gross domestic product climbed 3% compared with a year earlier, more than the 2.5% consensus forecast.

Shares rose on the other side of the Tasman Sea too, with the S&P/NZX 50 gaining 0.5%, largely led by banking stocks.

The recovery in Asia gathered pace after a rally in oil prices during the US trading day, and positive economic data stateside, helping to ease jitters over the world economy.

A rally had started to form on Tuesday after Beijing increased the amount of cash in the lending market by reducing the reserve requirement ratios at Chinese banks. Markets by and large ignored the disappointing manufacturing figures out of the country.

Overnight, US manufacturing, auto sales and construction spending measures all improved, while federal funds futures, used by investors to bet on central bank policy, showed an increased likelihood of a Federal Reserve interest rate increase at its December policy meeting.

The Dow Jones Industrial Average also kicked the rally off, rising 2.1%.

"A lot of this does look to be underpinned by the stability that oil has found above the $30 level over the past two weeks," said IG strategist Angus Nicholson.

"China announced cuts to the [reserve requirement ratio for banks] this week, and markets are looking to the upcoming European Central Bank and Bank of Japan meetings for signs of further global monetary stimulus," he added.

Oil was down after Asian trading, however, with Brent crude last off 1.07% to $36.42, and West Texas Intermediate down 2.2% to $33.66 per barrel.

In currencies, the yen was 0.29% weaker against the US dollar, at JPY 114.34. The Aussie gained 0.47% on its American cousin after the strong GDP results, and was last at AUD 1.3878 per dollar, while the Kiwi kept sliding away, and was last 0.46% weaker at NZD 1.5154 per USD.