Banks trade near 2 year highs with bet on interest rate hikes

UK lenders HSBC and Standard Chartered, which derive most of their profits in Asia, are trading near two-year highs in Hong Kong, as investors bet higher interest rates globally will bolster their bottom lines. Both lenders, alongside their industry peers, have seen their shares advance since the start of the new year as it became clearer that central banks, from the Federal Reserve to the Bank of England, would need to increase their policy rates to address a rapid rise in inflation.

The rapid growth of Western economies as they recover from the coronavirus pandemic, alongside higher fuel costs, have contributed to rising costs of living. Recent government reports showed prices climbed the most in nearly 40 years in the US and by nearly three decades in the UK.

Before the pandemic hit in early 2020, executives at both HSBC and Standard Chartered had spoken optimistically about the potential for the Fed and other central banks to raise rates in the future and return to a more normal rate environment. The Fed is expected to raise rates at its meeting in March and could raise rates at least twice later this year after employers added more jobs in January and average hourly wages jumped higher.