Asian Stocks Rise As Oil Rebounds, Markets Await Fed Rate Hike

Asian stocks went up early Wednesdsay as crude oil prices rose and as the U.S. Federal Reserve headed to what investors believe will be an interest rate hike, the first in nine years, signaling confidence in the economy. Japan's Nikkei 225 rose 1.8 percent, South Korea's KOSPI 1.4 percent, and Australia's ASX 200 1.7 percent.

In the U.S. on Tuesday, the Dow Jones Industrial Average and the Nasdaq composite both rose 0.9 percent. The Standard & Poor's 500 index gained 1.1 percent.

West Texas Intermediate CLc1, the U.S. crude oil benchmark, rose for the second day, up 2.9 percent at $37.35. Brent crude LCOc1, the global benchmark, settled up 1.4 percent at $38.45, according to Reuters. Oil has fallen from above $100 per barrel in the middle of 2014, as production -- helped by fracking in the U.S. -- grew faster than demand, which was hurt by the slowdown in China. The decline forced oil companies to shelve expansion plans, triggering layoffs and hurting prospects of commodity, machinery and other suppliers of the industry. Oil crossed $40 a barrel after the OPEC meeting on Dec. 4, when Saudi Arabia refused to cut production to boost prices. It will be back above $40 in the first quarter, one analyst said.

"We were due for a relief rally. If we think about Brent, it traded down for seven straight days," Helima Croft, the chief commodities strategist at RBC Capital Market, told CNBC. "We think Quarter 1 could be in the $40s. We don't think it's sustainable at the really low levels."

Meanwhile, the Federal Reserve started its two-day meeting on Tuesday and is expected to announce the first rate increase since 2006 on Wednesday. The bank cut its benchmark rate to near zero in 2008 amid the global financial crisis and has kept it there since to help the economy recover. The negative effect of higher rates has been priced in because Federal Reserve Chairwoman Janet Yellen and other officials have signaled it and it will be offset by confidence in the economy, analysts said.

"The economy is getting a little bit better and raising rates does not mean the market is going lower, it’s actually a positive sign," said Joseph Benanti, the managing director of sales and trading at Rosenblatt Securities in New York.

Investors and traders will be parsing what the Federal Reserve says on Wednesday in Washington D.C. -- Thursday morning in Asia -- about the pace of further hikes and economic projections. This could fuel price swings, one analyst said. The actual rate decision will be made by the Federal Open Market Committee, or FOMC.

“The FOMC meeting could cause some fireworks,” Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients, as reported by Bloomberg. “This has been one of the most anticipated Fed meetings in modern history, but some trading volatility could still be expected as market participants interpret and misinterpret the FOMC language.”