The much-anticipated consumer price index allowed investors to breathe a sigh of relief after a tough couple of weeks that have been filled with worries about the world's top economy, as a weak run of jobs figures stoked recession fears.
While a report on wholesale prices is due later in the day, the main focus is now on next week's Fed policy decision and its post-meeting statement on the outlook for rates.
Bets are now surging on a 25-basis-point reduction, with talk of a 50-point shift muted by figures showing that core inflation had seen an unexpected uptick.
"The stronger than expected core CPI for August will no doubt weaken the case for a 50 basis point cut," Carol Kong at Commonwealth Bank of Australia told AFP.
"The inflation and labour market data are in line with a soft landing scenario in the US economy, rather than a recession. As such, we stick to our call for a 25 basis point cut next week.
"History shows the (policy board) will only deliver a larger than 25 point cut at the start of the easing cycle if there is a recession or some other negative economic/financial shock."
Philipp Bartschi at Bank J. Safra Sarasin added: "A first rate cut in September should now trigger a new cycle of interest rate cuts."
US traders welcomed the CPI data and pushed all three main indexes higher, with the Nasdaq up more than two percent and the S&P 500 more than one percent.
The rally was fuelled by a big jump in the tech sector, with chip titan Nvidia rocketing more than eight percent, Advanced Micro Devices almost five percent higher and Microsoft piling on 2.2 percent.
And the positive mood flowed through to Asia, where Tokyo led gainers and jumped more than three percent after seven days of losses, while Taipei put on three percent and Seoul more than two percent.
Hong Kong, Sydney, Singapore, Mumbai, Manila, Bangkok and Jakarta also enjoyed strong buying sentiment, though Shanghai retreated.
London, Paris and Frankfurt jumped at least one percent as investors gear up for an expected rate cut by the European Central Bank later in the day.
The advances were fanned by a rally among regional tech giants, particularly semiconductor manufacturers, who have wobbled in recent weeks on worries about the economy and high valuations following a scorching run-up in 2024.
In Tokyo, Advantest jumped more than nine percent and Hitachi more than five percent, while TSMC was up 4.8 percent in Taipei and Seoul-traded SK hynix added more than seven percent.
The spike in Japan's Nikkei was also helped by a drop in the yen sparked by expectations US rates would only likely be cut by the smaller amount.
The yen had hit 140.71 per dollar at one point Wednesday -- its strongest in nine months -- after a top Bank of Japan official said the bank would press on with its monetary tightening if the economy and inflation act as expected.
The unit was also helped by improving odds on a Kamala Harris US presidency after she was seen as coming out on top in her debate with Donald Trump, whose policies many observers see as being likely to strengthen the dollar.
Oil rose more than one percent, extending the previous day's gains of more than two percent that analysts said was helped by offshore platform production suspensions in the Gulf of Mexico caused by Hurricane Francine.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: UP 3.4 percent at 36,833.27 (close)
Hong Kong - Hang Seng Index: UP 0.8 percent at 17,240.39 (close)
Shanghai - Composite: DOWN 0.2 percent at 2,717.12 (close)
London - FTSE 100: UP 1.0 percent at 8,277.00
Dollar/yen: UP at 142.77 yen from 142.38 yen on Tuesday
Euro/dollar: DOWN at $1.1015 from $1.1018
Pound/dollar: UP at $1.3050 from $1.3046
Euro/pound: DOWN at 84.41 pence from 84.43 pence
West Texas Intermediate: UP 1.6 percent at $68.37 per barrel
Brent North Sea Crude: UP 1.7 percent at $71.80 per barrel
New York - Dow: UP 0.3 percent at 40,861.71 (close)
dan/pbt
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