Asian equities rallied Thursday after US data showed inflation cooled last month, fuelling speculation that the Federal Reserve will cut interest rates twice this year.
The news sent all three main indexes on Wall Street to record highs, with confidence given an extra boost by figures showing retail sales well below expectations, suggesting consumers were taking a step back.
The 3.4 percent clip in April consumer prices was in line with forecasts but down from March and capped a run of three straight months above estimates that forced investors to reel in their rate cut hopes.
The Fed is now tipped to reduce borrowing costs twice before the end of the year, an increase on the one previously predicted -- though a lot fewer than the six estimated in January.
"We see the April print as consistent with a direction of travel for inflation dynamics that -- in the context of moderation in the real economy -- can yield a September cut followed by a second in December," Evercore's Krishna Guha said.
Adding to the upbeat mood was a report showing retail sales were flat in April.
"The market likes it," said Gary Pzegeo of CIBC Private Wealth US.
"The news on core inflation was better than expected. Retail sales also showed some deceleration from the previously hot consumer sector. Taken together, this supports a Fed rate cut in the fall."
Taylor Nugent at National Australia Bank added: "It's a world more aligned with the Fed's characterisation that disinflation remains in train even if it is taking a bit longer than earlier hoped.
"It should help quieten, at least for now, any concern the Fed's confidence rates will prove sufficiently restrictive."
He added that the next move "is likely to be down".
Still, Minneapolis Fed boss Neel Kashkari was keen to move cautiously as he questioned how much of an impact monetary policy was having on inflation.
"That's an unknown -- we don't know for sure," he said.
"And that tells me we probably need to sit here for a while longer until we figure out where underlying inflation is headed before we jump to any conclusions."
His remarks came a day after Fed chief Jerome Powell said the battle against prices was proving tougher than expected and indicated rates could remain elevated for some time.
Investors, however, took the latest data as a reason to press on with a market rally, which on Wednesday saw the Dow, S&P 500 and Nasdaq end at all-time highs in New York.
Expectations for cuts by the Bank of England and European Central Bank helped London, Paris and Frankfurt to their own records.
And Asia extended the advances, with Hong Kong returning from a midweek break on a positive note, while Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, Manila and Jakarta were also well in the green.
Tokyo also advanced, even after data showed Japan's economy shrank more than expected in the first three months of the year.
The dollar held losses against its main peers as the prospect of lower rates made the greenback less attractive to foreign investors, while the cheaper greenback also pushed gold back towards $2,400 for the first time since last month.
Tokyo - Nikkei 225: UP 0.7 percent at 38,669.57 (break)
Hong Kong - Hang Seng Index: UP 0.6 percent at 19,193.40
Shanghai - Composite: UP 0.3 percent at 3,921.18
Dollar/yen: DOWN at 154.23 yen from 154.83 yen
Euro/dollar: DOWN at $1.0883 from $1.0886 on Wednesday
Pound/dollar: UP at $1.2685 from $1.2681
Euro/pound: UP at 85.79 from 85.77 pence
West Texas Intermediate: UP 0.5 percent at $78.98 per barrel
Brent North Sea Crude: UP 0.4 percent at $83.07 per barrel
New York - Dow: UP 0.9 percent at 39,908.00 (close)
London - FTSE 100: UP 0.2 percent at 8,445.80 (close)
