With most markets closed for the Lunar New Year break, there was little major reaction to the Federal Reserve's widely expected pause in interest rate cuts and indications that no more were in the pipeline.

The tepid performance in Asia followed a retreat among Wall Street main indexes but the volatility that greeted the start of the week has gone for now, though worries about the valuations of some top tech firms continue to weigh on sentiment.

Trading floors were jolted Monday after DeepSeek unveiled a chatbot that apparently matched the capacity of US artificial intelligence pacesetters for a fraction of the investments made by American companies.

Firms that have most benefited from a long-running scramble for all things AI took a heavy hit, with chip titan Nvidia the standout victim -- losing almost $600 billion in market capitalisation, while other major firms and chipmakers also felt the pain.

While some of the losses have since been recovered and leading lights in the industry talk up the benefits of the competition, there are fears about the hundreds of billions sunk into projects aimed at getting a lead in AI.

"The AI sector is still feeling the heat with bears circling, ready to pounce on any signs of weakness," said Stephen Innes at SPI Asset Management.

"The scepticism around tech valuations, already a popular spiel before Monday's wipeout, has only intensified.

"The argument that tech stocks are perilously overpriced now resonates even more on trading floors, fuelling a bearish outlook and gaining followers by the minute."

The DeepSeek news provided an extra facet to the current earnings season, with focus on how US tech giants will react.

Wednesday saw a broadly upbeat readout, with Facebook-parent Meta, IBM and Tesla posting healthy earnings, though Microsoft disappointed. Apple is due to report Thursday.

After the negative lead from New York, Asian markets diverged.

Tokyo, Sydney and Mumbai rose while Wellington, Manila and Jakarta slipped.

The Fed's decision to stand pat on rates made little difference, though analysts noted its statement said inflation "remains somewhat elevated", removing a reference in earlier statements to inflation making progress towards officials' long-term target of two percent.

After the announcement, boss Jerome Powell said: "With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance."

Donald Trump -- who last week revived his criticism of the central bank and Powell and called for rates to "drop immediately" -- hit out at policymakers accusing them on his Truth Social account of failing "to stop the problem they created with Inflation".

Powell said it was "not appropriate" for him to respond to the comments, adding that decision-makers would "wait and see" how Trump's plans to impose tariffs, and cut taxes, regulations and immigration would affect the economy.

While the Fed held, the European Central Bank is expected to press on with interest rate cuts Thursday as officials grow confident that the fight against inflation is on track.

- Key figures around 0645 GMT -

Tokyo - Nikkei 225: UP 0.3 percent at 39,513.97 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: DOWN at $1.0414 from $1.0425 on Wednesday

Pound/dollar: DOWN at $1.2437 from $1.2444

Dollar/yen: DOWN at 154.52 yen from 155.15 yen

Euro/pound: UP at 83.73 pence from 83.68 pence

West Texas Intermediate: UP 0.1 percent at $72.68 per barrel

Brent North Sea Crude: FLAT at $76.57 per barrel

New York - Dow: DOWN 0.3 percent at 44,713.52 (close)

London - FTSE 100: UP 0.3 percent at 8,557.81 (close)

dan/dhc

Dow

S&P Global Ratings

LVMH

Nvidia

Meta

MICROSOFT

Tesla

ASML Holding

INDEX CORP.