Stocks in Asia soar as US inflation dips

Asian shares have scaled a seven-week high, while the dollar wobbled after cooler-than-expected US inflation data sparked hopes that the Federal Reserve could tone down its aggressive interest rate hikes.

MSCI's broadest index of Asia-Pacific shares outside Japan soared 5.33 per cent, set for its biggest one-day percentage jump since March 2020. The index is down 23 per cent for the year but is heading for a weekly gain of more than 7 per cent, the biggest in more than two years.

European markets are set to extend the exuberant mood, with the pan-region Euro Stoxx 50 futures up 0.62 per cent, German DAX futures 0.70 per cent higher and FTSE futures up 0.11 per cent. E-mini futures for the S&P 500 rose 0.40 per cent.

Data on Thursday showed that the US consumer price index had been 7.7 per cent higher in October than a year earlier. It was the first annual increase of less than 8 per cent since February and the smallest since January.

"It's something the market had been waiting for a long time," said Shane Oliver, head of investment strategy and chief economist at AMP Capital. "There was a lot of money sitting on the sidelines."

Investors poured into risky assets after the data, sending the dollar tumbling and US Treasury yields to a five-week low.

After four consecutive 75-basis-point interest rate rises to tame decades-high inflation, the case is now building for the Fed to moderate its aggressive stance, said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

But Federal Reserve policymakers highlighted on Thursday that US borrowing costs might still end up higher for longer than widely thought, even as some officials embraced the prospect of more-gradual rate hikes.

"We would not extrapolate one month of softer inflation data as indicating inflation is now convincingly on a path toward the two-per cent target," Citi strategists wrote in a note, referring to the 2 per cent inflation target the Fed has set.

"The data and market reaction are reminiscent of previous cycles of optimism regarding the ease with which the Fed might quell too-high inflation," Citi added.

In China, health authorities on Friday eased some of the country's heavy COVID-19 curbs, including shortening by two days the quarantine times for close contacts of cases and inbound travellers.

The country's blue-chip CSI 300 Index was up 2.1 per cent and the Hang Seng Index surged 7.10 per cent.

China stocks have had a turbulent few weeks, sliding on outbreaks of COVID-19, the ensuing lockdowns as well as feeble economic data, but also surging sporadically on hopes of an eventual economic reopening.

Meanwhile, Australia's S&P/ASX 200 index closed up 2.73 per cent, while Japan's Nikkei gained 2.75 per cent.

In the currency market, the US dollar index slumped more than 2 per cent overnight to 108.100, the most in more than a decade. The index fell 0.194 per cent on Friday.

The greenback on Thursday recorded its worst day against the Japanese yen since 2016, having fallen 3.7 per cent. It has since clawed back some of those losses and on Friday was up 0.46 per cent at 141.60 yen.

Elsewhere, the crypto world remained gripped by the outlook for the crypto exchange FTX. Regulators froze some assets of FTX and industry peers raced to limit losses on Friday amid worsening solvency problems.

The firm was scrambling to raise about $9.4 billion from investors and rivals in a bid to save the firm, Reuters reported. Bitcoin fell 1.44 per cent to $17,295.

Meanwhile, oil prices rose on Friday after the US inflation data but were on track for weekly declines of more than 4 per cent due to COVID-related worries in China.

US crude rose 1.13 per cent to $87.45 per barrel and Brent was at $94.69, up 1.09 per cent on the day.