Data showing a smaller-than-expected rise in personal consumption and a still-healthy US economy injected a little optimism at the end of a debilitating week for traders, who are coming to terms with the prospect of borrowing costs staying elevated for some time.
However, there is still plenty of uncertainty as Fed officials line up to warn that more work is needed to bring inflation down to their two percent target, even after more than a year of tightening and with rates at two-decade highs.
All three main indexes in New York advanced Thursday thanks to a softening in crude prices, which have hurtled towards $100 a barrel in recent weeks owing to supply cuts by Saudi Arabia and Russia and a pick-up in demand in key consumer nations.
The dip came on the back of profit-taking, though observers said there may have been some help after the president of consultancy Rapidan Energy Group said Riyadh might be ready to revive production earlier than many had thought thanks to elevated prices.
"They do not want to deliberately over-tighten the market, because if you get a spike, then you get a demand collapse, and you get a bust," Bob McNally told Bloomberg Television on Thursday.
The recent advance in oil prices has stoked inflation concerns and sent Treasury yields to 16-year highs, dampening risk appetite.
But a sharp slowdown in personal consumption to its weakest pace in more than a year gave hope that another Fed hike before the end of the year was not a certainty.
- 'Goldilocks economy' -
Richmond Fed chief Thomas Barkin said it was too early to make a call on another hike owing to the prospect of a government shutdown if lawmakers do not hammer out a funding deal.
That came after Chicago Fed boss Austan Goolsbee said decision-makers were in danger of overtightening as they focus too much on the need for job losses to tame inflation.
Eyes will now turn to the release of the personal consumption expenditures price index, which is the central bank's preferred measure of inflation.
"The latest economic puzzle pieces potentially paint a picture of a 'Goldilocks' economy," said SPI Asset Management's Stephen Innes, referring to an economy that is neither too strong nor too weak.
"At the same time, some investors may embellish the latest data prints as indicators that sufficient factors are slowing the growth trajectory, potentially leading them in the direction that interest rates cannot rise indefinitely."
But he warned "the coming months could prove to be more demanding for the economy. Several potential growth headwinds loom on the horizon, including higher rates and oil prices, resumption of student loan repayments, labour strikes and government shutdowns".
In Asian trade, Hong Kong jumped more than two percent thanks to a surge in tech firms including Alibaba and JD.com, while Sydney, Singapore, Wellington, Mumbai and Jakarta were also up. However, Tokyo, Manila and Bangkok dipped.
Mainland Chinese markets were closed for a public holiday.
An index of regional markets is on course to end the quarter down around four percent.
London, Paris and Frankfurt all advanced in the morning.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: DOWN 0.1 percent at 31,857.62 (close)
Hong Kong - Hang Seng Index: UP 2.5 percent at 17,809.66 (close)
London - FTSE 100: UP 0.6 percent at 7,649.90
Shanghai - Composite: Closed for a holiday
West Texas Intermediate: DOWN 0.1 percent at $91.66 per barrel
Brent North Sea crude: DOWN 0.3 percent at $95.08 per barrel
Dollar/yen: DOWN at 148.90 yen from 149.28 yen on Thursday
Euro/dollar: UP at $1.0603 from $1.0570
Pound/dollar: UP at $1.2240 from $1.2203
Euro/pound: DOWN at 86.63 pence from 86.59 pence
New York - Dow: UP 0.4 percent at 33,666.34 (close)
-- Bloomberg News contributed to this story --
dan/mtp
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