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Asia: Markets on course to end positive week on a high note

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[HONG KONG] Asian markets built on the past week's gains Friday following another rally on Wall Street as traders welcomed a below-forecast US inflation read that dampened expectations for a sharp lift in interest rates.

While geopolitical tensions continue to linger after Donald Trump pulled out of the Iran nuclear pact this week, dealers were buoyed by the prospect of cheaper borrowing after data showed consumer prices edged up only slightly in April.

News that Mr Trump and Kim Jong Un had agreed to meet on June 12 in Singapore - the first US-North Korean summit in history - lifted optimism and fuelled hopes for peace on the Korean peninsula.

The inflation data provided some relief to trading floors, which have fluctuated over recent months on worries that an improving US economy and an expected surge in inflation will force the Federal Reserve to tighten monetary policy.

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"The market is breathing a sigh of relief that there was not an upside surprise to the inflation stats," Peter Boockvar, the chief investment officer of Bleakley Financial Group, wrote in an email to clients.

The news lifted all three main indexes on Wall Street and those gains extended into Asia.

Hong Kong rose one percent, putting it on course for a fifth-straight gain, while Tokyo ended the morning 0.9 per cent higher and Sydney added 0.3 per cent. Shanghai was 0.1 per cent higher.

Singapore rose 0.4 per cent and Seoul gained 0.6 per cent, while Wellington and Taipei also posted healthy gains.

Manila was 1.7 per cent higher a day after data showed the economy expanded at a strong pace in the first three months of the year, and despite a central bank interest rate hike.

However, Greg McKenna, chief market strategist at AxiTrader, offered a word of caution, warning: "Sure, (consumer price) inflation didn't surprise on the upside. But that doesn't mean the Fed isn't still going to raise rates two or three more times this year and it doesn't mean quantitative tightening isn't going to continue."

Still, lower expectations for US rates hurt the dollar on Thursday and it struggled to recover in Asia, losing ground to the yen and euro. Even the pound held its own despite the Bank of England slashing its economic growth and inflation outlook.

Movements in the crude market were tepid after recent surges that came on the back of Mr Trump's Iran decision and data showing US demand for the commodity appeared to be picking up.

However, both main contracts remain around highs not seen since November 2014 and there is still talk of further rises to around US$80 a barrel.

Exchanges of rockets between Israel and Iran are also keeping traders wary of a flare-up in the volatile Middle East, with the Syria crisis still raging.

AFP