* SK Hynix ( SKHY ) earnings lifts dour mood after sharp selloff
* Eyes on slate of big tech earnings in test of AI trade
* Dollar stands tall ahead of delicately poised Fed decision
* Oil prices jump on renewed hostilities in Middle East
By Ankur Banerjee
SINGAPORE, July 29 (Reuters) - Asian stocks rebounded on
Wednesday after a brutal selloff a day earlier as anxiety about
valuations, rising competition and AI spending rocked markets
ahead of crucial earnings from big tech firms and a Federal
Reserve policy decision.
Oil prices jumped in early trading after fresh attacks in
the Middle East shattered the relative calm of recent days in
the U.S.-Iran war as investors fret about the impact of
depleting supplies on prices and global rates.
Asian chipmakers have been at the epicentre of this year's
AI-driven rally and, more recently, investor concerns about its
staying power, sparking sharp market swings. But strong earnings
from SK Hynix ( SKHY ) helped calm some of those fears.
South Korea's KOSPI gained over 1% in early trading
after sinking more than 10% to a three-month low on Tuesday.
Shares of SK Hynix ( SKHY ) rose 2% after the chipmaker posted a more
than sixfold increase in quarterly operating profit but missed
lofty expectations.
"The broader backdrop remains one of rotation rather than
outright risk aversion," said Chris Weston, head of research at
Pepperstone.
MSCI's broadest index of Asia-Pacific shares outside Japan
was 0.8% higher after shedding 3.6% on Tuesday
and remains on course for a monthly drop of 6.6%. Japan's Nikkei
gained 1% but is bracing for a 10% drop in July.
Earnings from "Magnificent Seven" members Microsoft ( MSFT )
and Meta later in the day will be a key test of the AI
trade, particularly after Alphabet and Tesla
spooked investors last week with negative cash flow reports.
Nick Twidale, chief market strategist at ATFX Global in
Sydney, expects another tough day for equities in the Asian day
with SK Hynix ( SKHY ) earnings exacerbating the uncertainty, while the
news from the Middle East is also expected to weigh.
"I think the risk of a Fed hike will also concern investors,
so rather than a more usual pre-Fed quieter market, I've got a
feeling it could be a volatile day ahead."
Nasdaq futures were choppy in Asian hours and were
last up 0.5% while European futures pointed to a higher
open.
OIL JUMPS AHEAD OF FED MEETING
Brent futures jumped 3% to $86.80 per barrel while
U.S. West Texas Intermediate (WTI) crude rose over 3% to
$81.95 after U.S. Central Command said Iran had launched
multiple ballistic missiles that were successfully intercepted.
"The latest attack highlights that the two sides remain a
long way from resolving the core dispute of passage through the
Strait of Hormuz that caused the earlier MOU to collapse," said
Tony Sycamore, market analyst at IG.
Iran effectively shut the key waterway to ships other than
its own after the U.S. and Israel launched strikes on February
28. A deal last month between Washington and Tehran partially
reopened it, but the agreement collapsed in early July after
Iran fired on ships using a channel it does not approve.
That has again put inflation pressures in the spotlight
ahead of the Federal Reserve's policy decision due later on
Wednesday. The U.S. central bank is seen as more likely to leave
interest rates steady even as a growing number of its
policymakers fret openly about inflation.
The decision remains unusually hard to call under the
no-guidance regime adopted by the new Fed Chair Kevin Warsh,
with traders pricing in a 33% chance of a hike. The U.S. dollar
was perched near a one-month high ahead of the decision.
"We think the market may once again be underestimating the
extent of the hawkish shift at the Fed, and that the (for now)
moderate increase in energy prices may tip an already finely
balanced meeting in favour of a hike this week," said Frank
Flight, head of macro strategy at Citadel Securities.
"We acknowledge that it is a close call, but we now see a
rate hike at the July meeting," Flight said.