© Reuters. MANAGEMENT PHOTO: A man stands on a viaduct with an electronic board showing Shanghai and Shenzhen stock indices in Shanghai
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By Hideyuki Sano and Alwyn Scott
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 to strong earnings from Microsoft (NASDAQ :).
MSCI’s benchmark for Asian ex-Japan shares fell 0.3%, dragging lower through profit-taking in resource stocks as some investors became wary of protracted valuations.
But it rose 0.2% and the region’s technology markets, such as South Korea and Taiwan, made small gains, helped by 0.5% gains in Nasdaq futures following Microsoft’s rapid quarterly results.
Microsoft shares rose 4% in extended trading after increasing its Azure cloud computing services by 50%. The results boosted optimism for other U.S. tech giants, including Apple (NASDAQ 🙂 and Facebook (NASDAQ :), which will release quarterly results later in the day.
“Microsoft’s revenue was excellent, even compared to strong market expectations,” said Norihiro Fujito, chief investment officer at Mitsubishi UFJ (NYSE :). Morgan Stanley (NYSE 🙂 Securities.
“These technology stocks have been a bit heavy 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 (NASDAQ 🙂 and Alphabet (NASDAQ :), reached 24.6% of the U.S. blue-chip 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.
The US Federal Reserve is due to announce the outcome of its two-day policy meeting on Wednesday. Analysts expect the Fed to stick to its pigeon tone to speed up the economic recovery.
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.
The ten-year norm notes yielded 1,040%, reaching a three-week low of 1,028% on Tuesday over increasing 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.
It flirted with this week’s low at 90.211, while the euro stuck at $ 1.2162.
Sterling rose 0.1% to $ 1.3735, the highest level since May 2018, while the Japanese yen fell slightly to $ 103.71 per dollar after a small rise the previous day.
The Australian dollar was slightly changed at $ 0.77744, showing a subdued response to stronger-than-expected local inflation data.
The oil price was supported by economic optimism, with futures up 0.3% at $ 52.79 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.