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GLOBAL MARKETS-Asian stocks stutters after rout, Fed leaves markets guessing on rates
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GLOBAL MARKETS-Asian stocks stutters after rout, Fed leaves markets guessing on rates
Jul 29, 2026 9:00 PM

* Divided Fed stands pat on rates, long-end bonds slump

* Stocks choppy as worries on AI trade rattle markets

* Oil near $90/barrel amid Middle East hostilities

(Updates to Asia late morning)

By Ankur Banerjee

SINGAPORE, July 30 (Reuters) - Asian stocks struggled for

direction in choppy trading on Thursday after a week of market

turbulence sparked by AI jitters, as a divided Federal Reserve

stood pat on rates and left bond markets uncertain about the

next move.

Brent futures slipped below $90 per barrel, after

jumping over 7% a day earlier as fighting in the Middle East

escalated, although data showed tankers continued to make their

way out of the region despite the continued strikes.

The dollar was on the defensive after the U.S. central bank

held rates steady although the split decision left investors

confused on whether the Fed will see through rate hikes to

combat inflation. Yields on longer-dated U.S. Treasuries rose to

19-year highs.

Asian chipmakers have been at the centre of attention this

week after a bruising selloff in South Koreanequities wiped more

than $2 trillion off market value and heightened investor

anxiety over the payoff from huge AI investments.

"Uncertainty about U.S. monetary policy, the sharp

steepening of the Treasury yield curve, growing tensions in the

Middle East and continued worries about the semiconductor

industry and AI sector mean that markets are likely to stay

volatile in the near term," said Vasu Menon, managing director

of investment strategy at OCBC.

The KOSPI was down 0.6% in choppy trading, on track

for a 15% weekly slump, a selloff that prompted Finance Minister

Koo Yun-cheol to apologise for the rollout of single-stock

leveraged ETFs and led authorities to unveil

market-stabilisation measures.

MSCI's broadest index of Asia-Pacific shares outside Japan

was flat after swinging wildly between gains and

losses. Japan's Nikkei was 1.2% higher, but set for a

3.7% drop in the week.

"Given that the fundamental thesis remains intact, there

does appear to be an irrational, panic-like element to the

current selling," said Gina Kim, portfolio manager for emerging

market equities at Nordea Asset Management in Singapore.

"I cannot comment on when the panic will stop as such but

some indicators to look out for would be margin balances in both

Taiwan and Korea for retail investors. Both are declining but we

would ideally need to see some levelling off," said Kim.

Chipmaker Samsung Electronics said its operating

profit jumped 19-fold to a record in the second quarter, helping

lift beaten-down investor sentiment.

Earnings reports from mega caps Meta and Microsoft ( MSFT )

underscored sharply contrasting fortunes for companies

racing to build AI infrastructure.

Microsoft ( MSFT ) reassured investors it would continue generating

cash through fiscal 2027 despite heavy spending, sending its

shares higher, while Meta's stock fell after a 91% collapse in

second-quarter free cash flow.

Nasdaq futures rose 0.7% in Asian hours while

European futures were 0.3% higher.

FED LOOKING TO MARKETS FOR CUES

In a post-meeting media conference, Fed Chair Kevin Warsh

vowed to contain inflation but gave no indication of the steps

the central bank might take.

Warsh noted that bond yields had risen notably since the

Fed's last policy meeting, reflecting market expectations of

higher interest rates. He welcomed the move, while stressing

that it did not oblige the Fed to validate those expectations

with policy action.

"To me this is a way of saying the market has done the Fed's

job so far," said Blerina Uruci, chief U.S. economist at T.

Rowe Price.

"Ultimately, Warsh's hawkish tone will not be enough to

ensure price stability. The market will learn the hard way that

no forward guidance means Warsh and the FOMC will not deliver on

a policy outcome just because the market has priced it."

That confusion left yields on 30-year U.S. bonds

at 5.2039%, having hit their highest since June 2007 at 5.2273%

late in New York trading.

Fed funds futures now implied around a 60% chance

the Fed would lift rates at its next meeting in September and

had 33 basis points of tightening priced in by year-end.

"The Fed is likely to face ongoing questions around its

credibility," said Kerry Craig, global market strategist at J.P.

Morgan Asset Management.

"The gap between the Fed's rhetoric and its actions may pose

a challenge for market pricing. A new chair faces a divided

committee and a bond market that's starting to question the

central bank's resolve."

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