Asian markets sank Friday after a sell-off on Wall Street in response to a forecast-busting jump in US inflation that fanned expectations the Federal Reserve will embark on a more aggressive campaign of monetary tightening.

The 7.5 percent jump in prices last month was the fastest in 40 years and reinforced fears that the central bank is falling behind the curve in keeping it under control, which has fed a sense of uncertainty across trading floors.

US stocks immediately sank on the news but managed to claw their way back as the day progressed before being hit by Fed official James Bullard, who said he wanted to see interest rates lifted one percentage point by the start of July.

The St Louis Fed boss said he was in favour of a 50 basis point lift next month -- double the usual rise and the first since 2000 -- and two more after that.

"I'd like to see 100 basis points in the bag by July 1," Bullard, who has a vote on policy this year, told Bloomberg News. "I was already more hawkish but I have pulled up dramatically what I think the committee should do."

He added: "I do not think it is shock and awe.

"I think it is a sensible response to a surprise inflationary shock that we got during 2021 that we did not expect."

Bullard also said he was open to a very rare announcement of rate hikes between meetings, which further rattled traders who fretted about a move before March, while calling for the quick reduction of the bank's bond holdings that have helped keep rates subdued.

Meanwhile, US Treasuries -- a guide to future borrowing costs -- have risen above two percent and analysts are predicting up to seven rate hikes this year.

"What began as 'just another ripper inflation print' quickly turned into panic of an emergency hike from the Fed," said Matt Simpson of StoneX Financial.

"As exciting as that is, we think an inter-meeting hike is an outside chance. But that is no reason for traders to not prepare for it, as it is these lower probability events which can spark the biggest moves."

Markets have for months been hit by speculation about the Fed's plans for monetary policy, having made an about-turn at the end of the year on its view that inflation would be temporary and subside as the global economy reopened.

All three main indexes in New York ended sharply lower with tech firms -- which are susceptible to higher rates -- among the worst hit. The Nasdaq dived more than two percent.

Asia, which has enjoyed a broadly upbeat week, was also largely down.

Hong Kong, Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, Manila and Jakarta all fell into the red, while Mumbai was down more than two percent. Tokyo was closed for a holiday.

London opened lower even as data showed the British economy rebounded a healthy 7.5 percent in 2021. Paris and Frankfurt also sagged.

The dollar rallied above 116 yen while it was also well up against the pound and euro as well as most other higher yielding currencies including the Australian dollar and South Korean won.

"We don't think the market has priced the full extent of what we feel the Fed has to do going forward," Elena Hernandez, at GenTrust LLC, told Bloomberg Television.

"Bullard's comments today were a big shock and surprise, especially talking about a potential inter-meeting movement. We expect rates to continue to sell off."

- Key figures around 0820 GMT -

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 24,906.66 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,462.95 (close)

London - FTSE 100: DOWN 0.7 percent at 7,617.19

Tokyo - Nikkei 225: Closed for a holiday

Dollar/yen: UP at 116.02 yen from 115.99 yen late Thursday

Pound/dollar: DOWN at $1.3530 from $1.3562

Euro/dollar: DOWN at $1.1385 from $1.1434

Euro/pound: DOWN at 84.15 pence from 84.25 pence

West Texas Intermediate: DOWN 0.1 percent at $89.79 per barrel

Brent North Sea crude: DOWN 0.2 percent at $91.20 per barrel

New York - Dow: DOWN 1.5 percent at 35,241.59 (close)

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Markets rally as traders brace for US inflation data
Hong Kong (AFP) Feb 9, 2022
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