A strong run of data sent chills through trading floors in February -- wiping out almost all January's rally -- as investors realised the US central bank had more work to do to control prices.
The unease largely overshadowed optimism about China's recovery after officials ended three years of strict zero-Covid containment measures that battered the world's number two economy.
Several Fed policymakers have lined up this year to insist that while inflation is coming down, they remain determined to keep hiking rates until they hit their two percent target.
The latest indicators have led investors to bet on rates hitting a peak of 5.5 percent, though six percent has also been mooted, putting further downward pressure on equities.
However, while talk has been swirling that the central bank could hike rates by 50 basis points at its March meeting, traders were given some much-needed hope by Atlanta Fed chief Raphael Bostic, who said he favoured a 25-point move.
He also questioned whether it should go much higher than 5.25 percent from the current 4.5-4.75 percent. That would allow the bank to pause its tightening in the summer.
"I let the data guide me," he said. "If the data continue to come in suggesting the economy is stronger than I had projected, I'll adjust my policy trajectory."
His comments came after he and Minneapolis boss Neel Kashkari called for more hikes and for rates to be held for some time into next year.
Meanwhile, figures released Thursday showed that eurozone inflation remained sticky in February, leading European Central Bank chief Christine Lagarde to say more tightening was needed.
All three main indexes on Wall Street ended in the green, with the Dow up more than one percent.
And Asia followed suit. Tokyo piled on more than one percent, alomg with Hong Kong and Mumbai, while Shanghai, Sydney, Seoul, Singapore, Taipei and Manila also enjoyed their time in the sun.
London, Paris and Frankfurt rose at the open.
SPI Asset Management's Stephen Innes said that while markets remained uncertain, "unlike last year, where policy shocks drove market shifts through most of the year, this year's price action has been driven as much by improving global growth as by tighter global policy".
"Indeed, that is a more digestible mix for stock market operators. Still, the uptick in January inflation has muddied this picture and caused a fair bit of panic in market circles."
However, he warned: "As long as activity data remain too strong, fanning the inflation fires, the real vulnerability for risk assets is a definitive hawkish policy shift, particularly from Chair (Jerome) Powell, who represents the core members."
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: UP 1.6 percent at 27,927.47 (close)
Hong Kong - Hang Seng Index: UP 0.7 percent at 20,567.54 (close)
Shanghai - Composite: UP 0.5 percent at 3,328.39 (close)
London - FTSE 100: UP 0.2 percent at 7,956.60
Euro/dollar: UP at $1.0615 from $1.0599 on Thursday
Pound/dollar: UP at $1.1976 from $1.1949
Euro/pound: DOWN at 88.64 pence from 88.68 pence
Dollar/yen: DOWN at 136.30 yen from 136.73 yen
West Texas Intermediate: DOWN 0.5 percent at $77.78 per barrel
Brent North Sea crude: DOWN 0.5 percent at $84.32 per barrel
New York - Dow: UP 1.1 percent at 33,003.57 (close)
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