Global equities mostly rose on Friday but the dollar struggled as slowing US inflation fuelled speculation that the Federal Reserve would take a softer approach to its monetary tightening campaign.

European indices also won a boost from data showing that the German economy, Europe's powerhouse, grew by a better-than-expected 1.9 per cent last year.

And London shares were buoyed by unexpected but slender UK economic growth for November.

"I wouldn't go as far to say that 2023 could be a good year for the economy – but it's suddenly looking much less bad than feared," Oanda analyst Craig Erlam told AFP.

I wouldn't go as far to say that 2023 could be a good year for the economy – but it's suddenly looking much less bad than feared- Oanda analyst Craig Erlam

Wall Street charged higher on Thursday after a report showed that inflation slid in December to the lowest level in over a year – rising 6.5 per cent from a year ago, the smallest increase since October 2021.

That bolstered bets that the central bank would lift interest rates just 25 basis points next month, easing worries about a possible recession for the world's largest economy.

The reading added to the optimism flowing through trading floors at the start of the year as investors put a painful 2022 behind them and focus on a recovery in the global economy.

Fed policymakers have been hiking borrowing costs since March, including four major 75-point increases, as they struggle to get a grip on inflation that reached four-decade highs.

"There's been a lot of positive news over the last couple of weeks, the most obvious of which being US jobs and inflation data," Erlam said. "It's not just the United States though – the EU looks better positioned to weather the economic headwinds, the UK may not be in recession, and China is poised to bounce back strongly from the COVID malaise," he added.

Most Asian markets tracked the New York rally, lifted also by optimism over China's reopening from the pandemic, though Tokyo shares dropped as a strong yen fanned fears that major exporters could suffer.

Shanghai, Sydney, Seoul, Mumbai, Singapore, Jakarta, Taipei, Wellington and Manila were all in the green.

Hong Kong also extended its winning streak despite a report saying the Chinese government was considering taking "golden shares" in giants Alibaba and Tencent, giving it a tighter grip on the tech sector.

Traders also shook off data showing a bigger-than-expected drop in Chinese imports and exports last month, on hopes Beijing's easing of strict COVID lockdowns and other restrictions will spur further an economic revival going forward.

Oil was set to end the week on an update note, energised by Chinese demand hopes and slowing US inflation.