Asian markets track Wall St rally as US inflation eases rate fears

A holiday-thinned week got off to a healthy start after last week's sell-off sparked by the US central bank's outlook that suggested officials will not lower borrowing costs as much as previously hoped over the next 12 months.

Sharp losses in reaction to the forecasts were pared after data showed the personal consumption expenditures (PCE) index, the Fed's preferred gauge of inflation, came in at 2.4 percent on-year in November.

While the reading was up slightly from October, it was lower than expected, providing some optimism that policymakers were winning the battle against prices and would have room to keep cutting rates.

The figures led to a pullback in US Treasury bond yields that had jumped last week to their highest levels since May, helped by comments from Chicago Fed chief Austan Goolsbee, who expressed confidence that inflation was returning to the bank's two percent target.

Still, there remains some trepidation among investors as Donald Trump prepares to return to the White House, pledging to cut taxes, slash regulations and impose tariffs on imports, which some economists warn could reignite inflation.

Ronald Temple, chief market strategist at Lazard, said in a commentary: "The initial response to the US election was positive as investors focused on the obvious tailwinds to profitability: lower corporate tax rates and less regulation.

"However, I expect much more dispersion within the equity market when the reality of a much-less-friendly trade environment sets in."

All three main indexes in New York ended more than one percent higher.

Asia followed suit, with Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, Taipei, Mumbai, Bangkok and Manila all in the green.

The dollar also held losses suffered in the wake of the PCE data, with the yen, pound and euro all stronger than Thursday.

Investors were also cheered by news that US lawmakers had reached a deal to avert a Christmastime government shutdown following marathon talks on Friday.

The last-minute scramble came after Trump and billionaire Elon Musk pressured Republicans to abandon an earlier bipartisan funding compromise.

Lawmakers then spent several days trying to hammer out another deal, with massive halts to government services hanging in the balance.

Non-essential operations would have ground to a halt if no deal had been struck, with up to 875,000 workers furloughed and 1.4 million more required to work without pay.

"This agreement represents a compromise, which means neither side got everything it wanted," President Joe Biden said on signing the bill on Saturday.

"But it rejects the accelerated pathway to a tax cut for billionaires that Republicans sought."
Key figures around 0630 GMT
Tokyo - Nikkei 225: UP 1.2 percent at 39,161.34 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 19,883.17

Shanghai - Composite: UP 0.2 percent at 3,373.24

Euro/dollar: UP at $1.0441 from $1.0431 on Friday

Pound/dollar: UP at $1.2580 from $1.2567

Dollar/yen: UP at 156.53 yen from 156.45 yen

Euro/pound: DOWN at 82.97 pence from 82.98 pence

West Texas Intermediate: UP 0.5 percent at $69.81 per barrel

Brent North Sea Crude: UP 0.4 percent at $73.25 per barrel

New York - Dow: UP 1.2 percent at 42,840.26 (close)

London - FTSE 100: DOWN 0.3 percent at 8,084.61 (close)