Asian stocks stutters after rout, Fed leaves markets guessing on rates

A divided Federal Reserve kept interest rates steady, leaving bond markets questioning the future path of US rates. (EPA Images pic)SINGAPORE: Asian stocks struggled for direction on Thursday, nursing steep losses for the week on mounting investor jitters around the AI trade, while a divided Federal Reserve kept interest rates steady, leaving bond markets questioning where rates are headed.Brent futures slipped below US$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 missile and drone strikes.The dollar was on the defensive after the US central bank held steady although the split decision left investors confused on whether the Fed will see through rate hikes to combat inflation. Yields on longer-dated US Treasuries rose to 19-year highs.Asian chipmakers have been the centre of attention this week after a deep selloff in South Korean stocks that wiped more than US$2 trillion from the country's equity market rocked markets and investors freted about the returns from massive AI spending.The KOSPI rose 4% in choppy trading on Thursday, but is staring at a 12% weekly decline that prompted finance minister Koo Yun-cheol to apologise for the introduction of single-stock leveraged ETFs."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.MSCI's broadest index of Asia-Pacific shares outside Japan rose over 1% in early trading. Japan's Nikkei was 2% higher, but set for a 3% drop in the week.Earnings from US megacaps Meta and Microsoft outlined the contrasting fortunes of the companies that are able to showcase their ability to generate cash even as they spend to build out AI infrastructure.Microsoft said it expects to keep generating cash through the fiscal year…