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Share prices have jumped as investors welcomed official figures that show the cost of living in the US increased at a slower than expected pace last month.
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 and down from 8.2% the previous month.
It means the US central bank may ease its aggressive approach to raising interest rates to tackle inflation.
On Thursday in New York the benchmark S&P 500 index 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%.
On Friday morning Hong Kong’s Hang Seng index jumped by 5%, while Nikkei in Japan and South Korea’s Kospi were 2.6% higher.
Shares in US technology companies saw some the strongest gains with Amazon up by over 12%, while Apple and Microsoft more than 8%.
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.