Asia stocks bounce gingerly but bank fears lurk

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Asian stocks were lifted from lows on Tuesday, with the rescue of Credit Suisse stemming selling in bank shares, though the mood was fragile and the stress in markets had traders wondering whether U.S. rate hikes might be finished.

That somewhat abated after regulators in Europe and BritainA London-listed exchange-traded fund that tracks such debts pared steeper losses to finish 5.7% lower on Monday, but nerves - and higher funding costs for banks - will likely linger.In foreign exchange markets the U.S. dollar steadied after slipping overnight. It last bought 131.90 yen and held at $1.0718 per euro. Bond markets whipsawed overnight as traders seek to figure out what the bank stress means for rates policy.

U.S. interest rate futures have priced in just one more 25 basis point hike before a series of cuts beginning as soon as June. The CME FedWatch tool shows pricing implying about a 74% chance of a rate hike on Wednesday. "The banking sector's near-death experience over the last two weeks is likely to make Fed officials more measured in their stance on the pace of hikes," said Standard Chartered's head of G10 FX research, Steve Englander.

"If the pauses, the message may be that it sees further hikes as markets settle down. But the reality may be that a March pause effectively ends the hiking cycle if the economy slows." In commodity markets, demand jitters have Brent crude futures pinned below $80 a barrel; they were last at $73.80. Gold hit a one-year high of $2,009 an ounce overnight, before easing to $1,979 on Tuesday.

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