Most markets rise as US inflation boosts Fed slowdown hopes

Asian markets mostly rose again Friday and the dollar remained under pressure after data showing another slowdown in US inflation fuelled bets the Federal Reserve will take a softer approach to its monetary tightening campaign.

The reading added to the positive energy flowing through trading floors at the start of the year as investors put a painful 2022 behind them and focus on a recovery in the global economy, helped greatly by China's reopening.

All three main indexes on Wall Street extended gains after the much-anticipated consumer price index came in at its lowest level since October 2021 as months of Fed interest rates begin to kick in.

The report also showed the first month-on-month dip in the CPI for about two years.

The news boosted bets on the central bank lifting rates just 25 basis points next month, easing worries about a possible recession in the world's top economy.

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Policymakers have been hiking borrowing costs since March, including four bumper 75-point increases, as they struggled to get a grip on inflation as it hit four-decade highs.

In early trade, most Asian markets tracked the New York rally. Shanghai, Sydney, Seoul, Singapore, Taipei, Wellington, Manila and Jakarta were all in the green.

Hong Kong rose marginally but was weighed by a sluggish performance in tech firms after a report said the Chinese government was considering taking "golden shares" in giants Alibaba and Tencent, giving it a tighter grip on the sector.

Tokyo dropped more than one percent as an increasingly stronger yen took its toll on exporters.

The dollar was unable to bounce back from hefty losses suffered in the wake of the inflation figures, with the Japanese unit at its strongest level since June, while the euro is at an eight-month high.

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'Inflation remains stubborn'

However, while there are hopes that inflation has peaked, the head of the International Monetary Fund warned that the full impact of monetary tightening had yet to be felt and central banks still had more work to do.

Kristalina Georgieva said sectors such as housing were beginning to hurt in the United States, the jobs market remained strong with low unemployment.

"As long as people are employed, even if prices are high, consumers spend.... But we all know that the impact of tightening financial conditions is yet to bite, in terms of unemployment," she said in a briefing on the world economy.

"Inflation remains stubborn, and in that sense, the job of central banks is not yet done."

And analysts warned there were still plenty of bumps in the road ahead, with concern now turning to the effect of higher rates on corporate earnings.

"The Fed will go down this path of tightening, no pivots of any kind. Maybe a pause at best," Adam Coons at Winthrop Capital Management told Bloomberg Television.

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"It could mean a lot of pressure for equity markets" when an earnings recession is also likely in the first half of the year.

Oil prices dipped but were well on course for a weekly gain thanks to rising demand expectations as China emerges from zero-Covid and the US inflation figures soothe concerns about interest rate rises.

Key figures around 0255 GMT

Tokyo - Nikkei 225: DOWN 1.2 percent at 26,143.41 (break)

Hong Kong - Hang Seng Index: UP 0.3 percent at 21,571.40

Shanghai - Composite: UP 0.4 percent at 3,176.81

Dollar/yen: DOWN at 128.94 yen from 129.27 yen on Thursday

Euro/dollar: DOWN at $1.0849 from $1.0854

Pound/dollar: DOWN at $1.2209 from $1.2214

Euro/pound: UP at 88.87 pence from 88.84 pence

West Texas Intermediate: DOWN 0.1 percent at $78.35 a barrel

Brent North Sea crude: DOWN 0.1 percent at $83.92 a barrel

New York - Dow: UP 0.6 percent at 34,189.97 (close)

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London - FTSE 100: UP 0.9 percent at 7,794.04 (close)

Source: AFP