A return of risk appetite buoyed by a strong performance from Wall Street pushed Asia shares sharply higher on Wednesday. Japan’s Nikkei 225 average closed up by more than 660 points or 4.11% at 16,746.55, its highest close in three weeks.

China’s markets staged a rally that saw both Shenzhen and Shanghai Composites add 4.7% and 4.24% respectively despite an announcement from credit ratings agency, Moody’s Investors Services that it was downgrading its outlook on China to “negative” from “stable”.

The strong performances signalled a return of risk appetite that largely ignored encouraging economic data from the US which showed that manufacturing appeared to stabilize in the world’s largest economy.

“March has brought with it an apparent determination to shrug off the gloom of the first two months of the year but we expect rallies to be relatively short-lived,” predicted Jim Brechin, Chief Asian markets strategist at Japan-based broker-dealer, Resona Partners. “That said, the rally in Asian markets does tend to vindicate the advice we’ve been giving to clients to buy the dips in the market.”

Markets have had a tumultuous start to 2016 with concerns mounting that the US Federal Reserve will continue to raise interest rates despite a global economy that is clearly slowing and domestic economic data that appears to be pointing to, at least, a brush with recession.

“We think that sustainable increases in equity values are some way off for the moment but that could change if the Fed signals it will postpone further hikes in interest rates for the rest of the year,” said Brechin.

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