Asian shares surge as investors cheer slower US inflation

HONG KONG - Asian markets surged on Friday after a bumper session on Wall Street as lower US inflation dimmed expectations of more aggressive Federal Reserve rate hikes.

Hong Kong stocks rocketed six percent at the open while Tokyo's key Nikkei index also surged, closing up almost three percent.

The gains extended global rallies after the US consumer price index (CPI) showed that the annual pace of inflation was a lower-than-expected 7.7 percent in October, down from 8.2 percent in September.

As US residents reel from sky-high costs, the central bank has moved forcefully to lower demand by raising the benchmark lending rate six times this year.

The latest inflation data should be welcome news to Fed policymakers, because prices are "finally showing some response" to the steep rate hikes, said Rubeela Farooqi of High Frequency Economics.

"Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect," added AvaTrade analyst Naeem Aslam.

The dollar slumped against rival currencies following the data release, and shares rallied as investors cheered the prospect of less hawkish moves by the central bank.

The Dow was up 3.7 at the close and the tech-heavy Nasdaq index soared 7.4 percent, while European markets also ended higher.

Most Asian markets matched the upbeat mood.

Taipei jumped 3.7 percent, Seoul was up 3.4 percent and Sydney climbed 2.8 percent.

Singapore rose 1.7 percent, Shanghai was up 1.7 percent and Mumbai put on 1.9 percent.

READ | Stocks slump after key US inflation data

"As expected, buying in Asia tech is standing out this morning," Stephen Innes of SPI Asset Management said.

"But with investors still looking over their shoulders at the crypto schism and rising Covid cases in China, that tide that was lifting all boats is starting to recede in places," he cautioned.

Trade may also be "dominated by profit-taking and position squaring" after the rallies overnight and ahead of a US market holiday on Friday.

The crypto world has meanwhile been rocked by a surprise decision from Binance, the world's biggest cryptocurrency platform, to scrap a possible acquisition of rival FTX.com -- plunging bitcoin to a two-year low.

Noted investor Louis Navellier said the US inflation data was "a welcome relief" for markets.

"(It) takes stocks back to green for November and should let the seasonal rally continue with a little less fear of the Fed and more optimism about '23 earnings estimates," he said in a note.

Daniel Berkowitz, senior investment officer for investment manager Prudent Management Associates, however, struck a note of caution.

"While it always feels good to see markets rally, we think this morning’s rally is bordering on silly," he said.

"The market is reacting as if this is the continuance of a multiple-month, downward trend in inflation, and it is not."