Asian shares advanced Wednesday after a Wall Street rally led by the banks most beaten down by the industry's crisis.

Oil prices fell back and US futures were little changed.

Investors are awaiting an interest rate decision by the Federal Reserve, which is expected to temper its efforts to tame inflation given the recent turmoil that has wracked the banking sector.

Some of Wall Street's fear washed out after US Treasury Secretary Janet Yellen said the government could offer the banking industry more assistance if needed.

Most economists expect the Fed to announce a relatively modest quarter-point hike in its benchmark rate, its ninth hike since March of last year.

Huge test

Markets around the world have pinballed sharply this month on worries the banking system may be cracking under the pressure of the fastest set of hikes to interest rates in decades. This week's rally now runs into a huge test with the Fed decision.

In Asian trading, Tokyo's Nikkei 225 surged 1.9 per cent to 27,466.61, catching up on gains after the market was closed on Tuesday for a holiday. Hong Kong's Hang Seng index advanced 1.9 per cent to 19,631.80 and the Shanghai Composite index added 0.2 per cent to 3,261.14.

Australia's S&P/ASX 200 jumped 0.9 per cent to 7,015.60. The Kospi in South Korea climbed 1.2 per cent to 2,417.14.

Tuesday on Wall Street, the S&P 500 rose 1.3 per cent to lock in its first back-to-back gain since Silicon Valley Bank's rapid failure began two weeks ago. It closed at 4,002.87.

The Dow Jones Industrial Average rose 1 per cent to 32,560.60, while the Nasdaq composite jumped 1.6 per cent to 11,860.11.

Yellen told a bankers' group more government assistance “could be warranted” if risks arise that could bring down the system. That could mean making sure customers at a weakened bank get all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

“Janet Yellen coming out and saying should other deposits need to be protected, they're willing and able to do that, I think that's a very strong statement,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. “And so markets have been able to calm down.”

Banking crisis

Earlier this month, the US government said it would make all depositors at Silicon Valley Bank and Signature Bank whole. They were the second- and third-largest US bank failures in history.

Those banks had struggled as depositors rushed to pull their money out en masse. Such runs can topple a bank, and investors have since been hunting for the next one that could fall.

Much focus has been on First Republic Bank, which in some ways is similar to Silicon Valley Bank. Its stock had lost 90 per cent for the month through Monday but jumped 29.5 per cent Tuesday.

Other smaller and mid-sized banks also rallied, including a 9.1 per cent climb for Comerica and a 9.3 per cent jump for KeyCorp.

Also read: Lessons from global banking crisis

Hopes for the banking industry began to turn over the weekend after regulators pushed together two huge Swiss banks. Shares of both banks rose Tuesday in Switzerland, including a 12.1 per cent jump for acquirer UBS. Credit Suisse, meanwhile, rose 7.3 per cent after tumbling a day earlier.

Central banks have jacked up rates at a blistering pace in hopes of getting high inflation under control. Higher rates slow the economy, raising risks of a recession and also hurting prices for stocks and other investments.

Also read: How Credit Suisse has evolved over 167 years

Earlier this month, much of Wall Street was bracing for the Fed to reaccelerate its hikes and raise by 0.50 percentage points on Wednesday after reports on the job market, retail sales and inflation came in hotter than expected. Now, traders are beginning to bet that the Fed might even cut interest rates later this year.

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