Volkswacht Bodensee - Markets swing as US data is tempered by rate hike worries

Conversely, another set of dour figures out of China showed the country's recovery from zero-Covid was fast fading but added to speculation officials would unveil a fresh round of stimulus measures.

While it has come down from the four-decade highs hit last summer, US inflation remains double the Fed's two percent target despite almost a year and a half of monetary tightening.

At the same time, there is very little slack in the jobs market, pushing up wage growth and complicating the bank's task of tempering prices while trying to guide the economy to a so-called soft landing.

This week provided further proof that policymakers had more work to do, with data showing US consumer confidence soaring, while home sales and big-ticket purchases also rallied.

That was followed Thursday by news that first-quarter growth was more than initially thought owing to strong consumer spending, while first-time jobless claims fell the most since October 2021.

The figures soothed worries that the economy was on the verge of a recession caused by the rate hikes, helping the Dow and S&P 500 higher on Wall Street.

That came even after Fed boss Jerome Powell said this week that rates would likely rise twice this year.

The readings pushed US Treasury yields up, deepening a curve inversion -- when shorter-dated yields rise more than longer-dated ones -- seen as a warning of a coming recession.

And Optimal Capital Advisors' Frances Stacy warned that the pain might not be far away.

"Rate hiking works on a lagging basis. It tends to start to really erode consumerism 14 to 16 months in and we're in month 15," she told Bloomberg Television.

"The Fed is going to stamp on growth and they're going to stamp on growth to quell inflation until something in the system breaks where they can no longer justify stamping on growth."

Asian investors largely followed Wall Street higher but shifted cautiously.

Hong Kong, Shanghai, Sydney, Seoul, Singapore and Wellington rose but Tokyo, Taipei and Manila dipped.

Markets in Hong Kong and Shanghai were nervously higher after fresh data on China's economy showed further slowing, with factory activity contracting for the third straight month while growth in the services and construction industries slowed.

A string of similar data in recent months has fanned speculation that authorities will unveil measures to kickstart the economy.

But aside from some small interest rate cuts, officials have unveiled very little of substance to reassure investors, which has kept equities subdued.

Meanwhile, commentators have warned that a big-buck spending spree such as those seen in the past was unlikely, fuelling worries of an extended period of weak growth.

China's cabinet on Friday said it would "take effective measures to enhance the momentum of development, optimise the economic structure, and promote the sustained recovery of the economy... in a timely manner".

But Zhiwei Zhang of Pinpoint Asset Management said: "It is not clear if the weak economic data would push the government to launch aggressive stimulus measures soon."

Traders were keeping an eye on Japan after the yen weakened to more than 145 per dollar -- its lowest since November -- stoking expectations authorities will step in to support the currency.

It also tumbled to a fresh 15-year low against the euro after figures showed German inflation rose last month.

The yen has been battered against its major peers this year owing to the Bank of Japan's refusal to shift away from its ultra-loose monetary policy, even as inflation edges higher and most other central banks press on with their tightening campaigns.

- Key figures around 0300 GMT -

Tokyo - Nikkei 225: DOWN 0.5 percent at 33,058.99 (break)

Hong Kong - Hang Seng Index: UP 0.2 percent at 18,969.06

Shanghai - Composite: UP 0.4 percent at 3,196.43

Dollar/yen: UP at 144.90 yen from 144.82 yen on Thursday

Euro/dollar: DOWN at $1.0867 from $1.0872

Pound/dollar: DOWN at $1.2619 from $1.2613

Euro/pound: DOWN at 86.11 pence from 86.17 pence

West Texas Intermediate: UP 0.1 percent at $69.91 per barrel

Brent North Sea crude: UP 0.2 percent at $74.45 per barrel

New York - Dow: UP 0.8 percent at 34,122.42 (close)

London - FTSE 100: DOWN 0.4 percent at 7,471.69 (close)

O.Bulka--BTB