(Updates at 0545 GMT)
Asian stocks surged on Wednesday and the yen was volatile after the Bank of Japan raised interest rates in a hawkish pivot, while investors assessed contrasting results from Microsoft and chipmaker AMD that suggested a divide in the AI landscape.
Oil prices rose from seven-week lows on escalating tension in the Middle East after Palestinian militant group Hamas said its leader Ismail Haniyeh was killed in Iran's capital of Tehran.
The BOJ also laid out a detailed plan for quantitative tightening to pare monthly bond buying in stages, to about 3 trillion yen ($19.6 billion) by January-March 2026, as it raised its overnight call rate target to 0.25% from zero to 0.1%.
"The BOJ will hope that the rate rise will be a confidence booster to the economy in that it will signal that the central bank believes the economy is on a path to something approaching 'normal'," said Gary Dugan, CEO of the Global CIO Office.
Markets initial reaction was choppy as analysts said media reports ahead of the BOJ decision had set expectations of a rate hike and bond tapering program from the central bank.
Japan's benchmark Nikkei .N225 was last up 0.10%, while the yields on Japanese government bonds were lower.
The yen JPY=EBS swung between gains and losses. It was last flat at 152.845 a dollar, but still on course for a gain of more than 5% in July, its first month of gains this year.
The yen started the month rooted near 38-year lows of 161.96, weighed down by the wide gap between interest rates in Japan and other developed nations.
But factors such as likely official intervention, a sell-off in equities and a reassessment of popular carry trades helped the currency rebound to a 12-week high last week.
"Whether we will see further gains (in the yen) now depends on whether Governor Ueda adopts a hawkish tone and offers clear forward guidance at his press conference," said Vasu Menon, managing director of investment strategy at OCBC.
"It is hard to see Ueda going full-on hawkish given the recent mixed economic data from Japan."
BOJ Governor Kazuo Ueda is expected to hold a news conference at 0630 GMT to explain the decision.
Meanwhile, stocks in China soared on Wednesday as investors welcomed a Politburo meeting that stressed the need to boost consumption. Data also showed China's manufacturing activity shrank for a third month in July, keeping alive expectations that Beijing will need to launch more stimulus.
Chinese blue-chip stocks .CSI300 were up about 2%, while Hong Kong's Hang Seng .HSI was also 2% higher. That took MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS 1% higher.
Futures indicated European bourses were set for a slightly higher open, with Eurostoxx 50 futures STXEc1 up 0.12% and FTSE futures FFIc1 0.39% higher.
FED AWAITED Central banks dominate investor attention on an action-packed Wednesday, with a Federal Reserve decision due later in the day. Markets expect the U.S. central bank to stand pat on rates but indicate rate cuts are on the way.
Markets are fully pricing in a cut of 25 basis points (bps) in September, with roughly 68 bps of easing priced in for the year.
The dollar index =USD , which measures the U.S. currency against six rivals, was at 104.46 and is down over 1% in July.
However, some analysts expect the Fed to stay cautious as the labour market is still tight.
Investors are jittery about the AI frenzy and tech valuations as results from tech bellwethers reinforced the idea that the payoff in hefty AI investments may take longer than first thought.
Disappointing earnings from Microsoft MSFT.O sent its shares lower, along with those of other tech firms, while strong earnings from Advanced Micro Devices AMD.O spurred a rally in chip stocks. Nasdaq futures NQc1 rebounded, and were last up 1%.
The Australian dollar AUD=D3 sank to a three-month low, while stocks (xjo) soared more than 1% as a soft inflation report squashed lingering speculation that interest rates would have to rise again.
In commodities, U.S. crude CLc1 was 1.77% higher at $76.05 per barrel and Brent LCOc1 was at $79.82 per barrel, up 1.51% on the day.
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