TOKYO / NEW YORK (Reuters) – Asian stocks slipped on Wednesday as investors looked to the Federal Reserve for guidance on its monetary policy, while futures contracts for U.S. technology stocks jumped after strong earnings from Microsoft.
European equities are expected to slide slightly, with EuroStoxx 50 futures up 0.3% and FTSE futures up 0.4%.
MSCI’s benchmark for Asian ex-Japan shares fell 0.2%, dragging it down by taking profits in resource stocks as some investors became wary of protracted valuations.
‘The world economy seems to be losing some momentum and there is still no clear sign that COVID-19 infections are slowing down, even after vaccinations have started in some places. I expect stocks to be stuck in a series for a while, ‘said Hisashi Iwama, senior portfolio manager at Asset Management One.
But the tech sector remained a bright spot after Microsoft’s earnings rose Nasdaq futures by 0.5%, while Japan’s Nikkei also rose 0.3%.
Microsoft shares rose 3.7% with expanded trading after growing its Azure cloud computing services by 50%, boosting optimism for other U.S. technology giants, including Apple and Facebook, which release quarterly results later in the day .
“Microsoft’s earnings were excellent, even compared to strong market expectations,” said Norihiro Fujito, Mitsubishi UFJ’s chief investment officer Morgan Stanley Securities.
“These tech firm stocks have been a bit weaker since August, but they are likely to lead the market again, given their good prospects,” he said.
At their peak in August, the combined market capitalization of the five largest U.S. technology companies, which also includes Amazon and Alphabet, reached 24.6% of the U.S. blue chip S & P500 index. It stood at 22.7%, two years ago still well over 15%.
S & P500 futures contracts were mostly flat, with caution limited before the Fed’s policy meeting as well as cyclical gains after stellar gains this month.
The S & P500 is now trading at 22.7 times its expected earnings, close to its September high of 23.1 times, which was the most inflated level since the dotcom bubble in 2000.
A surge in the shares of video game company Gamestop, which is driven by retail investors, has also raised concerns that a rally driven by governments and central banks has become excessive.
Analysts, however, expect the US Federal Reserve to stick to its weak tone to speed up the economic recovery when it closes its two-day policy meeting on Wednesday.
U.S. stimulus talks are also in focus with U.S. Senate leader Chuck Schumer, who says Democrats will continue President Joe Biden’s $ 1.9 billion coronavirus relief plan without Republican support if necessary.
Benchmark 10-year notes yielded 1,035%, reaching a three-week low of 1,028% on Tuesday over rising speculation, and Biden may have to scale down its ambitious stimulus plan.
The US dollar was little moved as investors waited for the Fed’s decision on whether to buy more risky currencies.
The dollar index flirted with the lows of this week at 90.204, while the euro held on to $ 1.2161.
Sterling rose to as high as $ 1.3753, a level last seen in May 2018, while the Japanese yen changed hands from $ 103.70 per dollar.
The Australian dollar fell 0.1% to $ 0.77739, showing a subdued response to stronger-than-expected local inflation data.
Oil prices are backed by economic optimism, with US crude contracts 0.6% higher at $ 52.95 a barrel.
The International Monetary Fund has increased its forecast for global growth in 2021, as widely expected, and many investors expect the global economic recovery from the pandemic-driven downturn to continue.
Edited by Lisa Shumaker and Sam Holmes