Australia

Australian shares are set to edge higher after US stocks jumped, staging their biggest rally of the year, after softer-than-expected inflation data reignited bets that the Federal Reserve might slow the pace of its interest-rate increases. At 3:30 p.m. on Thursday, Both the S&P and Nasdaq were on pace for their biggest one-day gains since 2020.

ASX futures were up 147 points or 2.11% at 7105 as of 7:00am on Friday, pointing to a gain at the open.

Thursday's report from the Labor Department offered rare relief to investors. The core consumer-price index -- which excludes volatile energy and food prices -- rose 6.3% in October from a year earlier, less than the 6.5% increase economists surveyed by The Wall Street Journal had expected and down from a 40-year high in September. Overall inflation was 7.7%, down from 8.2% in September.

The data gave investors fresh hope that the Fed, which is slated to move ahead with a half-percentage-point interest-rate increase next month, will moderate its pace of interest-rate increases in 2023.

"We believe that the stock and bond markets have found a bottom and we can rally off the lows," said Jay Hatfield, portfolio manager at Infrastructure Capital Advisors, in emailed comments. Mr. Hatfield added that he believes inflation will ease even more next year, especially if energy prices continue to trade lower than where they were in the first quarter of 2022.

In commodity markets, Brent crude oil rose 0.9% to $US 93.48 a barrel, gold jumped 2.76% to US$ 1,753.83.

In local bond markets, the yield on Australian 2 Year government bonds dropped to 3.15% while the 10 Year fell to 3.71%. Overseas, the yield on 2 Year US Treasury notes rose to 4.33% and the yield on the 10 Year US Treasury notes was down at 3.83%.

The Australian dollar hit 65.85 US cents down from the previous close of 64.30. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 100.66.

Asia

Mainland China stocks sank with sentiment hurt by worries that Beijing may further tighten Covid-19 curbs to contain fresh outbreaks. Chip makers' stocks weighed on the market with small-caps leading the losers. Electric-vehicle and battery makers' shares fell due to data this week showing weak October sales and the coronavirus' disruption on the supply chain. BYD Co. declined 3.5% and China's Contemporary Amperex Technology Co., the world's largest maker of electric-vehicle batteries, was 3.0% lower. Among the gainers were software and media companies. Focus Media Information Technology Co. rose 4.3% and Zhejiang Canaan Technology increased 1.4%. The Shanghai Composite Index dropped 0.4% to 3036.13, the Shenzhen composite Index declined 1.0% and the ChiNext Index was 1.8% lower.

Hong Kong stocks ended the session lower, extending a three-day losing streak as the market pulled back from soaring gains in the first few days of the month. The benchmark Hang Seng Index dropped 1.7% to settle at 16081.04. Car makers led losses, with the sector continuing to suffer a selloff since Wednesday on disappointing sales data over recent weeks. Geely dived 5.6% and BYD tumbled 4.8%. Chinese internet giants further weighed on the market, as Alibaba and NetEase each shed 4.5% and 4.4%, respectively.

Japan's Nikkei Stock Average fell 1.0% to close at 27446.10, tracking Wall Street losses overnight that were partly driven by the rout in cryptocurrencies. Cross-asset correlations are tightening, especially between cryptocurrencies and tech stocks, said Stephen Innes, managing partner of SPI Asset Management, in an email. Among the Nikkei's worst performers, e-commerce and online retailer Rakuten Group slipped 5.0% and IT service and consulting company NTT Data lost 3.2%. USD/JPY was at 146.14, compared with 145.78 as of Wednesday's Tokyo stock market close. The 10-year JGB yield was down a half basis point at 0.245%.

Europe

European stocks rose after a firmly upbeat start to trading on Wall Street amid lower-than-expected US inflation data. The pan-European Stoxx Europe 600 gained more than 2%, in London the FTSE 100 advanced 1.1% the French CAC 40 climbed about 2% and the German DAX jumped more than 3%.

"US inflation data has provided a welcome shot in the arm for markets," IG analyst Joshua Mahony wrote. "The impact of today's inflation data has been further accentuated by comments from Fed members Harker and Logan, who see the pace of rate hikes slowing over coming meetings.

North America

US stocks jumped, staging their biggest rally of the year, after softer-than-expected inflation data reignited bets that the Federal Reserve might slow the pace of its interest-rate increases. At 3:30 p.m. on Thursday, Both the S&P and Nasdaq were on pace for their biggest one-day gains since 2020.

For much of 2022, data on consumer-price increases has been bad news for markets. Inflation has proved stickier than many economists anticipated. That has forced the Fed to raise interest rates at the fastest pace in decades, causing bond yields to soar to multiyear highs and the stock market to slump.

But Thursday's report from the Labor Department offered rare relief to investors. The core consumer-price index -- which excludes volatile energy and food prices -- rose 6.3% in October from a year earlier, less than the 6.5% increase economists surveyed by The Wall Street Journal had expected and down from a 40-year high in September. Overall inflation was 7.7%, down from 8.2% in September.

The data gave investors fresh hope that the Fed, which is slated to move ahead with a half-percentage-point interest-rate increase next month, will moderate its pace of interest-rate increases in 2023.

Fed Chairman Jerome Powell suggested at a news conference last week that he wouldn't necessarily need to see a series of lower inflation readings -- as many traders had previously thought -- in order to support slowing the pace of rate increases. That gives Thursday's report significant weight for money managers who believe markets will be in the best position to stage a comeback when inflation peaks and the Fed is able to at least pause its rate hikes.

"We believe that the stock and bond markets have found a bottom and we can rally off the lows," said Jay Hatfield, portfolio manager at Infrastructure Capital Advisors, in emailed comments. Mr. Hatfield added that he believes inflation will ease even more next year, especially if energy prices continue to trade lower than where they were in the first quarter of 2022.

Others are less sure. Even with last month's moderation, inflation is still very high. Investors have also seen a version of this rally play out before -- only for it to crumble apart. Stocks soared over the summer on bets that the Fed would pivot away from tightening monetary policy and shift from interest-rate increases to rate cuts as early as next year. But the gains were fleeting. Markets slumped in both August and September, weighed down by stern talk from Fed officials about the need to keep raising rates, as well as hotter-than-expected inflation data.

"I can see a window where the market gets this kind of second false dawn, like we saw over the summer, where it gets excited about a peak Fed and peak inflation narrative," said Hani Redha, a portfolio manager at PineBridge Investments.

Thursday's gains were broad, lifting stocks across all industries. Cryptocurrencies also got a break. The fall from grace of FTX, previously one of the largest cryptocurrency exchanges, rippled across the digital currency and token markets this week. Crypto exchange Binance on Wednesday reversed course on a rescue offer for FTX, leaving the firm with an uncertain future.

Even with those headwinds, though, bitcoin rose to $17,725 after slumping Wednesday to less than $16,000. Shares of cryptocurrency exchange Coinbase jumped 12%.