Asian shares cautious as oil jumps on US strikes in Yemen
Asian shares were cautious on Friday as the escalating conflict in the Red Sea region sent oil prices surging, while slightly higher-than-expected U.S. inflation data did not dent investors' views on early and aggressive rate cuts in the U.S. and Europe.
The rally in rates may have been helped by dovish comments from European Central Bank (ECB) President Christine Lagarde who said rate cuts would occur if the central bank has certainty that inflation had fallen to the 2% level.
In breaking news, the United States and Britain have started carrying out strikes against targets linked to Houthis in Yemen, after the Iran-backed group attacked international ships in the Red Sea. Brent futures jumped 2% to $78.95 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2.1% to $73.53.
The intensifying conflict in the Red Sea has kept shares on edge.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.1%, although Japan's Nikkei gained 1.2% to another 34-year high, boosted by a weak yen.
Chinese inflation data showed the country's economic recovery remained weak in December, with the consumer price index falling 0.3% from a year ago. For all of 2023, consumer inflation stood at 0.2%, lower than the official target of around 3%.
China's blue chips slipped 0.3%. Hong Kong's Hang Seng index also fell 0.3%.
Overnight, Wall Street reversed earlier declines and was mostly flat on the day after data showed U.S. consumer prices rose more than expected in December, with a closely watched core measure coming in slightly above consensus.
Andrew Lilley, chief rates strategist at Barrenjoey, said that even though the core U.S.
