Traders are optimistic the Federal Reserve will stand pat on interest rates at its meeting next week / © AFP
Stocks mostly advanced on Friday, fired by renewed optimism that the Federal Reserve will hold off lifting interest rates next week as fresh data indicated further tightening in the US labour market.
Expectations the central bank will stand pat next week -- for the first time since starting its hiking cycle last year -- have pushed equities higher for most of the month, helped by the end of the US debt ceiling standoff.
Confidence was dealt a blow this week by the Bank of Canada's surprise lift and a similar move in Australia, causing concern on trading floors that the Fed will act after all.
But news of a forecast-busting jump in jobless claims for last week -- to the highest since October 2021 -- cemented the belief officials will pause until next month.
"The Fed is the price-setter here, the others are the price-takers, and we should not confuse the two," Evercore ISI's Krishna Guha said.
The Bank of Canada and the Reserve Bank of Australia "are raising rates in part because they think the Fed will hike once more and if they fail to match this they risk forex depreciation".
Thursday's figures came after last week's key non-farm payrolls data for May, which was taken as being healthy enough to suggest the economy was in good shape but weak enough to give the Fed room to hold fire for now.
All three main US indexes ended higher, with the S&P 500 entering a bull market after rising more than 20 percent from its October low.
Analysts said a pick-up in industrial stocks indicated a broadening of the rally while others said the United States could even avoid a recession, which many had feared would happen because of the surge in interest rates over the past year.
- China stimulus talk -
In Asian trade, Hong Kong, Shanghai, Tokyo, Seoul, Sydney, Taipei, Mumbai and Jakarta were all in positive territory.
But Singapore, Manila, Bangkok and Wellington dipped, while London, Paris and Frankfurt skidded in the morning.
Traders are now awaiting the release of the key US consumer price index next week, which comes ahead of the Fed policy decision, but with bets on a pause growing, observers said the July meeting was already in focus.
"Early days, but the June non-farm payrolls report is building to be a particularly interesting one -- on the wages front in particular -- given that money markets continue to price some 21 basis points of Fed tightening over the combined June and July (policy) meetings," said National Australia Bank's Ray Attrill.
Meanwhile, eyes are on China, where there is growing speculation that authorities will unveil fresh stimulus measures to kickstart the world's number two economy, with the post-zero-Covid rally already fading.
Disappointing readings on manufacturing activity and trade this week have compounded the view that officials need to step in, with reports suggesting the People's Bank of China will cut interest rates soon.
Expectations were ramped up Thursday after a key government adviser said borrowing costs should come down to help struggling firms' financing ability.
The need for action was reinforced Friday by data showing consumer inflation essentially flat in May and wholesale prices falling more than expected.
"On the whole, the muted inflation environment may call into question the sustainability of the economic recovery, but it also provides a favourable backdrop for policymakers to roll out more policy support," said HSBC's Erin Xin.
On currency markets, the Turkish lira sat around record lows against the dollar, even as newly re-elected President Recep Tayyip Erdogan appointed former Wall Street executive Hafize Gaye Erkan as central bank governor, signalling a possible shift in his unconventional policies to fight inflation.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: UP 2.0 percent at 32,265.17 (close)
Hong Kong - Hang Seng Index: UP 0.5 percent at 19,389.95 (close)
Shanghai - Composite: UP 0.5 percent at 3,231.41 (close)
London - FTSE 100: DOWN 0.1 percent at 7,593.68
Euro/dollar: DOWN at $1.0768 from $1.0785 on Thursday
Pound/dollar: DOWN at $1.2544 from $1.2560
Dollar/yen: UP at 139.46 yen from 138.89 yen
Euro/pound: UP at 85.85 percent from 85.82 pence
West Texas Intermediate: DOWN 0.3 percent at $71.08 per barrel
Brent North Sea crude: DOWN 0.3 percent at $75.73 per barrel
New York - Dow: UP 0.5 percent at 33,833.61 (close)