Asian equities soared Friday to extend a surge on Wall Street, where all three indexes saw extreme swings in response to a forecast-beating inflation report that cemented expectations for more big Federal Reserve rate hikes.
Sterling also held on to its big gains sparked by speculation the UK government was set to perform another u-turn on its controversial debt-fuelled mini-budget, though the yen remained stuck around three-decade lows against the dollar.
The hotly awaited US inflation report showed prices rose last month at a faster clip than expected despite a series of interest rate increases this year, which have fanned fears of a global recession.
The month-on-month reading came in double estimates, while core inflation -- which strips out volatile energy and food prices -- was also elevated.
The figures sparked a sharp plunge on Wall Street but the selling quickly reversed, and all three main indexes finished the day with gains of more than two percent with analysts suggesting several reasons for the extreme move.
Some said the initial selling may have been a knee-jerk reaction before traders accepted the data was not as bad as other recent reports, while technical factors were also flagged.
Others speculated that equities had finally reached their bottom after a year of selling that has seen many indexes plunge into correction territory having lost more than 20 percent from their recent peaks. "The market reversal was a head-scratcher", said OANDA's Edward Moya. "Some investors are convinced core inflation will soon start trending lower. Fed tightening will remain aggressive at 75 basis points in November and possibly December," he added.
"Monetary policy is quickly getting restrictive and that will undoubtedly send inflation lower. It looks like rates will peak slightly above five percent and for some that is good enough of a reason to get back into stocks."
However, he warned that "given the path for rates is higher, this market reversal won't last long".
- Yen weakness -
Still, Asian investors took the opportunity to buy up some bargains after another torrid week.
Tokyo, Hong Kong and Taipei put on more than three percent apiece, while Seoul was up more than two percent. Shanghai, Sydney, Singapore, Wellington, Manila and Jakarta were also sharply higher.
