Stocks struggled for direction in choppy trading overnight after a week of market turbulence sparked by AI (artificial intelligence) jitters, with a divided US Federal Reserve standing pat on rates and leaving bond markets uncertain about the next move.
Investors searching for clarity from a newly led Fed were disappointed on Wednesday, warning that the central bank’s mixed messages on the outlook for interest rates could unsettle stocks and bonds and increase the risk of market volatility.
The Fed kept interest rates unchanged in a target range of 3.5 per cent to 3.75 per cent.
The vote drew three dissents from the 12-member panel, leading analysts to characterise the decision as a “hawkish hold” that leaves the door open to future rate hikes.
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US president Donald Trump’s new Fed chair Kevin Warsh vowed to contain inflation, which remains above target, but did not indicate the steps the central bank might take, noting that bond yields had risen notably since the Fed’s last policy meeting, reflecting market expectations of higher interest rates.
“Talking hawkish but not acting so reduces the Fed’s credibility,” said Wall Street veteran Ed Yardeni. “We conclude that the Fed has to raise short-term rates to lower long-term rates.”
That confusion left yields on 30-year U.S. bonds at 5.2039 per cent, having hit their highest since June 2007 at 5.2273 per cent late in New York trading.
Meanwhile, Asian stocks extended their losses overnight Wednesday and into Thursday morning.
Asian chipmakers have dominated headlines this week as investors raised concerns over massive artificial intelligence spending and China potentially emerging as a competitive threat.
The tech-heavy indexes in Seoul and Taipei are set to finish July down 33.2 per cent and 12.3 per cent, respectively, with the KOSPI eyeing its weakest month on record.
The KOSPI was down 1 per cent in choppy trading this morning, on track for a 15 per cent 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.
