Cost of living: Shares jump as US inflation cools

Share prices have risen as investors welcomed official figures that show the cost of living in the US increased at a slower-than-expected pace last month.

Shares soared in the US and in Asia as traders reacted to the data, and UK and European stock markets also rose on Friday morning.

The US consumer price index rose by 7.7% in October from a year earlier, according to the Labor Department.

That is the smallest annual increase since the start of the year.

The figure, which is down from 8.2% the previous month, means the US central bank may ease its aggressive approach to raising interest rates to tackle inflation.

On Friday Hong Kong's Hang Seng index jumped by 7.7%, while the Nikkei in Japan ended the day 3% higher and South Korea's Kospi gained 3.4%.

The Hang Seng was also boosted after Chinese state media reported that Covid-19 travel measures will be eased.

That came after the benchmark S&P 500 index in New York rose by more than 5.5%, while the Dow Jones Industrial Average gained 3.7%. At the same time the technology-heavy Nasdaq soared by 7.35%.

Shares in US technology companies saw some of the strongest gains with Amazon up by over 12%, while Apple and Microsoft rose more than 8%.

European share prices edged higher on Friday too, although they didn't match the large gains seen in the US and Asia.

In London, the FTSE 100 index was up by 0.4% in early trading after official figures showed the UK appears to be heading into recession.

The economy contracted by 0.2% between July and September, according to the Office for National Statistics.

Meanwhile the US dollar, which has jumped in value this year, weakened against major currencies including the pound and the yen.

Earlier this month the US Federal Reserve raised its key interest rate to a fresh 14-year high.

The move took the central bank's benchmark lending rate to 3.75%-4%, the highest since January 2008.

Also this month, the Bank of England lifted interest rates to 3% from 2.25%, the biggest jump since 1989, and warned that the UK is facing its longest recession since records began.

A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row.

Higher interest rates make it less likely that people will spend on big ticket items, such as homes, cars or expanding their businesses. That fall in demand is, in turn, expected to curb price increases.

Food and energy prices have jumped, in part because of the Ukraine war, which has left many households around the world facing hardship and started to drag on the global economy.

But some economists are concerned that higher rates could also trigger slowdown in the global economy.