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GLOBAL MARKETS-Asian stocks waver after deep rout, Fed leaves markets guessing on rates
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GLOBAL MARKETS-Asian stocks waver after deep rout, Fed leaves markets guessing on rates
Jul 29, 2026 11:21 PM

(Updates to Asia afternoon)

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

* Stocks stutter as worries on AI trade rattle markets

* Oil near $90/barrel amid Middle East hostilities

By Ankur Banerjee

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

direction in volatile 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 wobbled 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.

Nasdaq futures rose 0.4% while European futures

pointed to a muted open. Investor attention will be on policy

decision from the Bank of England, where the central bank is

expected to stand pat.

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

was last down 0.6% after swinging wildly between

gains and losses through the session. Japan's Nikkei was

0.24% higher, but set for a 4% drop in the week.

Asian chipmakers have been at the centre of attention this week

after a bruising selloff in South Korean equities 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.

VOLATILE KOSPI SHOWS NO SIGNS OF EASING

The KOSPI was down 1% 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.

"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.

Samsung Electronics ( SSNLF ) said it expects chip shortages

to worsen and extend into 2028 as the firm posted a more than

250-fold jump in chip profit, easing some nerves.

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.

Earnings from Amazon ( AMZN ) and Apple ( AAPL ) later on

Thursday will provide further clarity on the durability of the

AI trade.

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."

(Reporting by Ankur Banerjee and Rae Wee in Singapore; Editing

by Christian Schmollinger, Shri Navaratnam and Lincoln Feast.)

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