But most markets gave back some gains after the World Bank said it was downgrading its forecast for the global economy in light of trade conflicts and other strains. Japan's Nikkei 225 index jumped 1.8% to 20,776.10 while the Hang Seng in Hong Kong advanced 0.3% to 26,815.78. The Shanghai Composite index was almost flat at 2,863.04 and Australia's S&P ASX 200 climbed 0.4% to 6,358.50. South Korea's Kospi added 0.1% to 2,071.06. Shares also rose in Taiwan and Southeast Asia.
Shares also were boosted by the Australian central bank's decision on Tuesday to trim its benchmark interest rate by a quarter of a percentage point in the first such cut in nearly three years. Australia's economy expanded at a 1.8% annual rate, 0.4% quarterly, in the first quarter, as the doldrums in trade and the housing market were offset by large inventories, the government reported Wednesday.
The World Bank said it expects the world economy to expand at a 2.6% pace this year, the slowest growth since 2016 and below its 2.9% forecast made in January. "We are not pushing the panic button yet," said Ayhan Kose, a World Bank economist. But he said the anti-poverty agency foresees a potentially deeper slowdown if trade hostilities persist.
The biggest lift for regional markets came from Fed Chairman Jerome Powell's comment Tuesday that the central bank was "closely monitoring" trade developments and would "act as appropriate" to sustain the U.S. economic expansion.
Investors read his remarks as a signal that the Fed will likely cut interest rates later this year. Fresh hopes for resolving the U.S.-Mexico trade dispute also helped. Mexican Foreign Minister Marcelo Ebrard said Mexico can likely reach a deal with the U.S. at a meeting Wednesday. That would stave off President Donald Trump's threat to place 5% tariffs on Mexican goods beginning June 10 as part of a broader immigration dispute.
Automakers rallied. Many vehicle makers import vehicles from Mexico and would be hit particularly hard if the U.S. imposes tariffs. Ford Motor climbed 3.2%, General Motors gained 6% and Fiat Chrysler added 4%.
Investors have been worried the expanding conflicts between the U.S. and some of its biggest trading partners could slow U.S. economic growth and stymie corporate profits. They've been dumping stocks for the past month and fleeing to safer holdings such as bonds.
The Nasdaq composite rode the rally in technology stocks, gaining 2.7%, to 7,527.12. The index recouped losses racked up a day earlier, when tech stocks slumped over concerns that several big internet companies could face more scrutiny from antitrust regulators.
The S&P 500 index gained 2.1% to 2,803.27, its best performance since Jan. 4. The Dow vaulted 512.40 points, or 2.1%, to 25,332.18. The Russell 2000 index of small companies picked up 38.58 points, or 2.6%, to 1,508.56.
Powell didn't explicitly say what the Fed would do, but investors in the futures market are now pricing in a 59 percent chance of a Fed rate cut by July. Robust market gains earlier this year were partly fueled by the Fed's adoption of a more patient approach to its rates policy after steadily raising rates for two years. Investors have been hoping it will go further and cut interest rates to give the economy another push.
ENERGY: Benchmark U.S. crude shed 54 cents to $52.94 per barrel in electronic trading on the New York Mercantile Exchange. It gained 0.4% to settle at $53.48 a barrel on Tuesday. Brent crude oil, the international standard, gave up 45 cents to $61.52 per barrel. It closed 1.1% higher at $61.97 per barrel overnight.
CURRENCIES: The dollar slipped to 108.10 Japanese yen from 108.15 yen on Tuesday. The euro strengthened to $1.1261 from $1.1251.
AP Business writers Damian J. Troise and Alex Veiga contributed.