Australian shares have reversed early gains, as China eased some of its strict COVID-19 rules, spurring hopes of a recovery in demand.
The local share market inched up and hovered at a five-month high in early trade, led by sharp gains in heavyweight mining stocks.
The ASX 200 closed down 12 points or 0.2 per cent to 7,146.
By 4:55pm AEDT, the Australian dollar was down at 66.65 US cents.
Miners gained as much as 3.7 per cent after iron ore and other base metals' prices soared on China easing some of its COVID-19 rules.
Fortescue, BHP and Rio Tinto gained between 3.3 per cent and 10.1 per cent.
Diversified mining services provider Perenti jumped 4.3 per cent, after the mining services provider upgraded its earnings outlook for fiscal 2023.
Energy stocks also rose 0.9 per cent after oil prices rose on health authorities in China easing some of country's new COVID-19 curbs, raising hopes for improved demand.
Woodside Energy rose 1.5 per cent, while Santos dropped 0.7 per cent.
Financials index was down 1 per cent.
Tech stocks were down 1.4 per cent despite Wall Street gains.
Elders, on the other hand, fell as much as 22.9 per cent to become the worst performing stock on the benchmark after the agribusiness firm flagged concerns about reaching full harvest potential for summer and winter crops due to extreme rainfall in the eastern states.
Wall Street gains for second day
On Friday, global stocks rallied for a second day on hopes cooler US inflation would lead to less aggressive interest rate hikes by the Federal Reserve, an outlook that pushed the dollar to its biggest two-day drop in 13 years.
Crypto exchange FTX filed for US bankruptcy and founder Sam Bankman-Fried stepped down as chief executive, while oil prices jumped after health authorities in top global crude importer China eased some of the country's heavy COVID-19 curbs.
Gold prices rose to a near three-month high and headed to at least their best week since July 2020 after Thursday's better-than-expected report on US consumer prices bolstered bets that the Fed would be less hawkish about hiking rates.
On Wall Street, stocks rose to add to the prior day's biggest daily percentage gains for the S&P 500 and Nasdaq in more than 2-1/2 years after year-over-year inflation in October fell below 8 per cent for the first time in eight months.
"We got a potential view that the Fed may not need to get as horrible as we thought over the last couple of weeks," Marvin Loh, senior global macro strategist at State Street in Boston, said about the market's exuberance.
"Risk could be stabilising here."
The Fed has no choice but to press on, but if inflation is no longer rising, that indicates the end of more extensive tightening may be near, Loh said.
The Dow Jones Industrial Average rose 0.1 per cent, the S&P 500 gained 0.92 per cent and the Nasdaq Composite advanced 1.88 per cent.
Investors eye slower pace of US Fed rate hike
MSCI's all-country world index rose 1.9 per cent on Friday, lifting it to its highest levels since mid-September, as the market repriced expectations for the Fed's target rate to peak below 5 per cent, or about 20 basis points lower than recent highs.
Market bets that the Fed will raise rates by 50 basis points at its next meeting in December increased, while the probability of a 75 basis points hike decreased.
"While this year has been amazingly exciting and fascinating from a market perspective, maybe its crescendo was really yesterday," said Christian Chan, chief investment officer at AssetMark Financial Holdings Inc.
The CPI report showed that when "you peeled back the number, it kept on getting better," but labour markets and corporate margins will be pressured as the Fed fights to lower inflation, posing potential headwinds for risk assets, Chan said.
In Europe, Britain's economy shrank in the three months to September at the start of what is likely to be a lengthy recession.
On Friday, the STOXX 600 index ended the session up 0.1 per cent at a 11-week high, with financial services, mining and retail stocks leading the gains.
John O'Toole, global head of multi-asset investment solutions at asset manager Amundi, said the reaction in stock markets to the CPI showed investors were "pretty desperate" for good news and could be getting ahead of themselves.
Rates could "stay at an elevated level for an extended period of time, and that's something that financial markets just don't have in their outlook," O'Toole said.
The weaker outlook for corporate earnings and jobs has yet to be fully priced into markets, he added.
US dollar declines, bitcoin slumps
Investors poured into risky assets after the US data, driving the dollar down 1.6 per cent on Friday.
The greenback posted its biggest two-day decline since March 2009.
The yield on benchmark US 10-year paper slipped below 4 per cent on Thursday.
US bond markets were closed on Friday for Veterans Day.
In China, health authorities on Friday eased the country's heavy COVID curbs, including shortening by two days the quarantine times for close contacts of cases and inbound travellers.
The country's blue-chip CSI 300 index rose 2.8 per cent and the Hang Seng Index surged 7.7 per cent.
Oil prices rose after the US inflation data but were on track for weekly declines of more than 4 per cent due to COVID-related worries in China.
Brent crude rose $2.32 to settle at $95.99 on Friday.
The turmoil in cryptocurrency markets last week sent bitcoin to two-year lows.
After the FTX announcement on Friday, bitcoin fell 4.17 per cent to $US16,819.00.
FTX's native token plunged 28.47 per cent at $US2.666, having fallen 90 per cent month-to-date.
ABC/Reuters
