Markets rally with Wall St after US inflation eases further

HONG KONG, China — A surge in tech firms Thursday helped Asian markets track a Wall Street rally after data showed US inflation at a more than three-year low, reinforcing expectations the Federal Reserve will cut interest rates next week.

The much-anticipated consumer price index allowed investors to breathe a sigh of relief after a tough couple of weeks that have been filled with worries about the world's top economy, as a weak run of jobs figures stoked recession fears.

While a report on wholesale prices is due later in the day, the main focus is now on next week's Fed policy decision and its post-meeting statement on the outlook for rates.

Bets are now surging on a 25-basis-point reduction, with talk of a 50-point shift muted by figures showing that core inflation had seen an unexpected uptick.

"The stronger than expected core CPI for August will no doubt weaken the case for a 50 basis point cut," Carol Kong at Commonwealth Bank of Australia told AFP.

"The inflation and labour market data are in line with a soft landing scenario in the US economy, rather than a recession. As such, we stick to our call for a 25 basis point cut next week.

"History shows the (policy board) will only deliver a larger than 25 point cut at the start of the easing cycle if there is a recession or some other negative economic/financial shock."

Philipp Bartschi at Bank J. Safra Sarasin added: "A first rate cut in September should now trigger a new cycle of interest rate cuts."

US traders welcomed the CPI data and pushed all three main indexes higher, with the Nasdaq up more than two percent and the S&P 500 more than one percent.

The rally was fuelled by a big jump in the tech sector, with chip titan Nvidia rocketing more than eight percent, Advanced Micro Devices almost five percent higher and Microsoft piling on 2.2 percent.

And the positive mood flowed through to Asia, where Tokyo led gainers and jumped more than three percent after seven days of losses, while Taipei put on three percent and Seoul more than two percent.

Hong Kong, Sydney, Singapore, Mumbai, Manila, Bangkok and Jakarta also enjoyed strong buying sentiment, though Shanghai retreated.

London, Paris and Frankfurt jumped