TOKYO / NEW YORK (Reuters) – Asian stocks fell on Wednesday as investors looked to Federal Reserve guidelines for its monetary policy, while futures for US technology stocks jumped after strong gains from Microsoft.
European equities are expected to slip slightly, with EuroStoxx 50 futures down 0.3% and FTSE futures 0.4%.
MSCI’s measure of Asian ex-Japanese equities fell 0.2%, dragged lower by profit-taking in commodity stocks as some investors have become wary of overvaluation.
“The global economy appears to be losing momentum and there is no clear sign yet that COVID-19 infections are slowing down, even after vaccinations have started in some places. I expect stocks to remain within a certain bandwidth for a while, ”said Hisashi Iwama, senior portfolio manager at Asset Management One.
But the tech sector remained a bright spot after Microsoft Nasdaq futures’ earnings lifted 0.5%, while Japan’s Nikkei also rose 0.3%.
Microsoft’s stock rose 3.7% in expanded trading after Azure cloud computing services grew 50%, boosting optimism for other US technology giants, including Apple and Facebook, which released quarterly results later in the day.
“Microsoft’s earnings have been excellent, even compared to strong market expectations,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“The shares of those technology companies have been in the doldrums since August, but given their solid outlook, they are likely to lead the market again,” he said.
At its peak in August, the combined market capitalization of the five largest US technology companies, including Amazon and Alphabet, reached 24.6% of the US blue chip S & P500 index. It was 22.7%, well above 15% two years ago.
Futures on the S & P500 were largely flat, capped by prudence ahead of the Fed’s policy meeting and profit taking on cyclical stocks after tremendous gains this month.
The S & P500 is now trading at 22.7 times expected earnings, near its September 23.1 peak, the highest level since the dotcom bubble in 2000.
A surge in the shares of video game company Gamestop, driven by private investors, has also raised concerns that a rally driven by masses of stimulus money from governments and central banks has turned extreme.
Still, analysts expect the US Federal Reserve to maintain its moderate tone to help accelerate the economic recovery when it concludes its two-day policy meeting on Wednesday.
Attention is also drawn to the US stimulus talks, with US Senate leader Chuck Schumer saying Democrats will move forward with President Joe Biden’s $ 1.9 trillion coronavirus plan without Republican backing if necessary.
Benchmark 10-year bonds returned 1.035%, after hitting a three-week low of 1.028% on Tuesday amid rising speculation, Biden may need to scale back and possibly delay his ambitious stimulus plan.
The US dollar showed little movement as investors awaited the Fed’s decision for guidance on whether or not to buy riskier currencies.
The dollar index flirted with this week’s low of 90.204, while the euro remained stable at $ 1.2161.
The pound rose to $ 1.3753, a level last seen in May 2018, while the Japanese yen changed hands at 103.70 per dollar.
The Australian dollar fell 0.1% to $ 0.7739, showing a muted response to stronger-than-expected local inflation data.
Oil prices were buoyed by economic optimism, with US crude oil futures gaining 0.6% at $ 52.95 a barrel.
The International Monetary Fund has raised its forecasts for global growth in 2021, as widely expected, and many investors expect the global economic recovery from the pandemic downturn to continue.
Adaptation by Lisa Shumaker and Sam Holmes