Volkswacht Bodensee - Asian stocks shrug off red-hot US inflation

The US consumer price index surged 8.5 percent in March compared with a year ago, the biggest jump since December 1981. CPI climbed 1.2 percent over February's level.

The report was the first to fully encompass the shock caused by Russia's invasion of Ukraine and Western sanctions against Moscow, which have caused energy and food prices to spike worldwide.

Though the US Federal Reserve was poised to raise interest rates quickly to tamp down inflation pressures, the effects will not be immediate.

Tokyo shrugged off the gloom, however, with the benchmark Nikkei 225 closing almost two percent higher.

"The Nikkei index rebounded after falling more than 600 points since the start of the week," Okasan Online Securities said in a note.

"Growth stocks were bought back as caution about excessive monetary tightening in the US receded."

In afternoon trade, Hong Kong was eking out small gains. Shares in Seoul and Sydney were also up, while Mumbai was down.

"Yes, US inflation was hot -– it's hottest in 40 years. But we're getting used to these extreme headline prints now," said Matthew Simpson, senior market analyst at City Index.

"Besides, now high levels of inflation are no longer new news, the focus is now shifting to its trajectory and how long it may take to tail off."

The lower-than-expected rise in core CPI "was all equity markets needed, using the singular data point to price in peak inflation" in the United States, said Jeffrey Halley, senior market analyst at OANDA.

"The perpetually bullish FOMO gnomes of the equity market, desperately searching for more drinks to keep the party alive, found it in the core inflation (month on month) data for March."

In Shanghai, where a Covid-19 outbreak has caused mass lockdowns and snarled global trade arteries, stocks were down by just under one percent.

That came as official data showed China's imports shrank on-year in March for the first time in nearly two years, hit by the coronavirus and weakening consumer demand.

Imports dropped 0.1 percent, according to data from China's Customs Administration.

- Crude contracts rise -

Both major crude oil contracts were back over $100 per barrel, after Russian President Vladimir Putin vowed to continue the invasion of Ukraine and China partially eased Covid-related curbs.

"Oil seems to be the primary benefactor of (the) Ukraine vs Russia conflict dragging out longer," noted Stephen Innes of SPI Asset Management.

In currency markets, the yen hit its lowest level against the dollar in two decades, extending recent falls as the gap widens between Japan's ultra-loose monetary policy and Fed tightening.

Despite being traditionally considered a safe-haven currency, uncertainty fuelled by the war in Ukraine has not caused the yen to strengthen.

Instead, the Fed's moves towards a more aggressive policy and the shock of rising oil prices in Japan -- a major importer of fossil fuels -- has pushed the currency lower, analysts say.

One dollar bought 126 yen at around 0630 GMT on Wednesday, the lowest rate since 2002.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: UP 1.93 percent at 26,843.49 (close)

Hong Kong - Hang Seng Index: UP 0.25 percent at 21,373.20

Shanghai - Composite: DOWN 0.82 percent at 3,186.82

Brent North Sea crude: DOWN 0.18 percent at $104.45 per barrel

West Texas Intermediate: DOWN 0.30 percent at $100.30 per barrel

Euro/dollar: DOWN at $1.0818 from $1.0864

Pound/dollar: DOWN at $1.2977 from $1.3006

Euro/pound: UP at 83.36 pence from 83.28 pence

Dollar/yen: UP at 126.22 yen from 125.61 yen

New York - Dow: DOWN 0.3 percent at 34,220.36 (close)

-- Bloomberg News contributed to this report --

C.Meier--BTB