Volkswacht Bodensee - Asian markets struggle as traders unmoved by US inflation data

Adding to the uncertainty was the battle to raise the US debt ceiling to avert a destabilising default, with Democrats and Republicans unable to reach a deal just weeks before the country runs out of cash to pay its bills.

The consumer price index reading was the lowest in two years and a tad below what was expected, giving the Fed a little room to take a break in its long-running rate hike campaign.

However, the figure came after a stronger-than-expected print Friday on jobs creation that showed the world's top economy remained strong, while observers said further evidence was needed to show that the tightening was bearing fruit.

The 4.9 percent rise in April was far above the Fed's stated goal of two percent, which some analysts said meant it was unlikely officials would consider cutting rates at the end of the year, as some investors had been betting on.

"We need more CPI prints to clarify that inflation is definitely declining," Priya Misra at TD Securities said.

"Markets may be too optimistic and put too much weight on the weakness in some series that are inherently volatile, such as hotels."

Still, Wall Street largely cheered the figures, with the S&P 500 and Nasdaq rallying, helped by a bump in rate-sensitive tech giants, though the Dow dipped.

Asia saw similar action, with Hong Kong and Shanghai edging slightly higher as data showed below-forecast Chinese inflation that indicated the nation's economic recovery was still struggling, though it gave the central bank room to provide some stimulus.

Seoul and Manila also gained but Tokyo, Sydney, Singapore, Wellington, Taipei and Jakarta were in the red.

The dollar held losses against its peers that came on a pick-up in bets the Fed will not lift rates in June.

The debt ceiling standoff continues to cause unease on trading floors as party leaders struggle to reach a consensus to allow more borrowing.

President Joe Biden and Republican House Speaker Kevin McCarthy plan to hold another meeting on Friday.

Former president Donald Trump, who is seeking re-election in 2024, said during a CNN town hall that Republicans should refuse to raise the US debt limit if they do not get the spending cuts they are demanding.

That would spark a default that most economists warn would be catastrophic for the global economy and markets.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.2 percent at 29,062.04 (break)

Hong Kong - Hang Seng Index: UP 0.2 percent at 19,792.95

Shanghai - Composite: UP 0.3 percent at 3,329.57

Euro/dollar: UP at $1.0987 from $1.0985 on Wednesday

Pound/dollar: UP at $1.2630 from $1.2627

Dollar/yen: DOWN at 134.07 yen from 134.34 yen

Euro/pound: DOWN at 86.97 pence from 86.98 pence

West Texas Intermediate: UP 0.3 percent at $72.75 per barrel

Brent North Sea crude: UP 0.3 percent at $76.60 per barrel

New York - Dow: DOWN 0.1 percent at 33,531.33 (close)

London - FTSE 100: DOWN 0.3 percent at 7,741.33 (close)

J.Fankhauser--BTB