* Fed expected to hold rates steady
* Fresh Middle East strikes push oil prices higher
* SK Hynix ( SKHY ) earnings fail to soothe anxiety
* Eyes on slate of big tech earnings
(Updates with European trading)
By Niket Nishant and Ankur Banerjee
July 29 (Reuters) - Global shares struggled to push higher
on Wednesday, as modest gains in Europe and the U.S. did little
to soothe investors spooked by a punishing selloff in Asia,
where unease over AI valuations has frayed nerves.
With sentiment towards AI-linked chipmakers turning sharply
negative amid mounting fears over competition from China,
investors now await earnings from tech heavyweights Microsoft ( MSFT )
and Meta, which will need to clear a high bar
when they report later in the day.
Expectations have become so lofty that even a sixfold jump
in SK Hynix's ( SKHY ) quarterly profit fell short, leading
to a 9.61% drop in shares.
"The selloff in chip stocks looks overdone, but volatility
should be expected whenever the market finds reasons to question
the durability of the AI cycle," said Jake Seltz, portfolio
manager for the Empiric LT Equity team at Allspring Global
Investments.
"Expectations were so high that good numbers have not always
been enough."
South Korea's KOSPI, which has become emblematic of
the sharp swings in AI sentiment, fell nearly 6% a day after
sinking more than 10% to a three-month low.
Finance minister Koo Yun-cheol apologised on Wednesday that
single-stock leveraged exchange-traded funds were introduced
without careful consideration. The approval of these ETFs has
been criticised as having led to increased volatility in the
South Korean market.
The pan-European STOXX 600 benchmark rose 0.13%,
helped by gains in oil and gas shares. On Wall Street, futures
tracking the tech-heavy Nasdaq 100 were up 0.09%.
The MSCI All Country World Price index
dipped 0.11%, hovering close to its lowest level in a month.
A rate decision from the Federal Reserve is also coming up
later in the day.
Traders largely expect the U.S. central bank to hold rates
steady, but are pricing in at least one hike by the end of the
year. Several of the central bank's policymakers have openly
expressed their concern about inflation.
While the Fed meeting is widely expected to be a
"non-event," higher funding costs pose a key risk to equities
this year, with many tech giants relying increasingly on public
markets to fund their expansion, said David Waddell, chief
investment strategist at Coastal Bridge Advisors.
OIL PRICES CLOUD INFLATION OUTLOOK
In addition to the twin tests of earnings and central bank
policy, investors are also contending with uncertainty in the
Middle East, where diplomatic efforts to end the war have
proceeded in fits and starts, and durable peace remains elusive.
"That sort of rapid flipping and flopping has made the
signal and the noise a lot harder to separate," said Edward
Acton, rates strategist at GMO.
Fresh strikes in the region lifted Brent crude futures
up 3.29% to $86.86 a barrel, putting the contract on
track to snap a three-day losing streak.
"Oil volatility, not just the level, can be inflationary if
some prices go up with oil but are reluctant to come back down,"
BofA Securities strategists wrote.
The prospect of oil-driven inflation has kept pressure on
Treasuries. The yield on the benchmark 10-year U.S. Treasury
note rose 1.04 basis points to 4.6103%, on course to
end a three-day decline.
The 30-year U.S. Treasury yield was at 5.0948%.
It has stayed above 5% for 17 consecutive sessions.
(Reporting by Niket Nishant in Bengaluru and Ankur Banerjee in
Singapore; Editing by Shri Navaratnam, Kate Mayberry, Amanda
Cooper and Mrigank Dhaniwala)