Asian markets surge on strong US consumer data

Japanese stocks surged and markets across Asia started strong on Friday, tracking substantial gains on Wall Street after encouraging U.S. retail sales data reassured investors about the health of the world's biggest economy.

The key Nikkei 225 index added nearly three percent following rallies on Wall Street, continuing a bullish run after stocks in Tokyo crashed Monday on worries about the U.S. economy and a stronger yen.

Encouraging economic growth in Japan had already spurred the market on Thursday.

"Stabilizing market conditions mean that the BoJ could again consider further policy normalization," Alvin Tan from RBC Capital Markets said in a note.

"But the shock of the recent Japan equities tumble and yen surge means that another hike likely won't be on the table in the BoJ's September meeting."

The dollar rose more than one percent against the yen after the retail sales report was released.

A weaker-than-expected labor market report recently sparked market turmoil over fears that the world's biggest economy was in worse health than anticipated—but continued spending should allay recession worries.

"That lackluster jobs data had everyone on edge, worried that the economy might crack under the pressure of high interest rates," independent analyst Stephen Innes said.

"But Thursday's numbers hint that the Fed might just pull off the impossible—a soft landing, slowing the economy just enough to snuff out inflation without plunging us into a recession."

Chinese data on Thursday showed the country's industrial production slowing and unemployment rising in July, while consumer spending marginally beat analysts' expectations.

But markets in Hong Kong and Shanghai were also buoyed on Friday.