© Reuters. ARCHIVE PHOTO: A man stands on an overpass with an electronic board showing Shanghai and Shenzhen stock indexes in Shanghai
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By Hideyuki Sano and Alwyn Scott
TOKYO / NEW YORK (Reuters) – Asian stocks fell on Wednesday, with investors looking to the Federal Reserve’s guidance on its monetary policy, while U.S. tech stock futures soared after strong gains from Microsoft (NASDAQ: ).
MSCI’s valuation of Asian stocks ex-Japan fell 0.3%, pulled down by the realization of earnings in resource stocks, as some investors were cautious about extended valuations.
But it rose 0.2% and the region’s high-tech markets, such as South Korea and Taiwan, made small gains, helped by 0.5% increases in Nasdaq futures, after Microsoft’s quarterly results.
Microsoft’s shares rose 4% in the extended trades after its Azure cloud computing services grew another 50%. The results increased optimism for other US tech giants, including Apple (NASDAQ 🙂 and Facebook (NASDAQ :), which announce quarterly results later in the day.
“Microsoft’s earnings were excellent, even compared to strong market expectations,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ (NYSE 🙂 Morgan Stanley (NYSE 🙂 Titles.
“The shares of these technology companies have been somewhat stagnant since August, but they should lead the market again, given the solid prospects,” he said.
At its peak in August, the combined market capitalization of the five largest US technology companies, which also include Amazon (NASDAQ 🙂 and Alphabet (NASDAQ :), reached 24.6% of the US blue chip index. It was 22.7%, still well above 15% two years ago.
The S & P500 futures were practically stable, limited by caution ahead of the Fed’s policy meeting, as well as by making profits in cyclical stocks after stellar gains this month.
The S & P500 is now trading at 22.7 times its expected profit, close to its September peak of 23.1 times, which was its most inflated level since the dot-com bubble in 2000.
The US Federal Reserve is expected to announce the results of its two-day political meeting on Wednesday. Analysts expect the Fed to maintain its dovish tone to help accelerate the economic recovery.
US stimulus talks are also in focus with U.S. Senate majority leader Chuck Schumer, saying Democrats will move forward with President Joe Biden’s $ 1.9 trillion coronavirus relief plan without republican support if needed.
The 10-year benchmark notes were yielding 1.040%, having reached a three-week low of 1.028% on Tuesday with increasing speculation that Biden may have to back down and possibly delay his ambitious stimulus plan.
The US dollar has barely moved as investors awaited the Fed’s decision seeking clues as to whether they should buy riskier currencies.
The flirted with this week’s low at 90,211, while the euro held firm at $ 1.2162.
The pound sterling rose 0.1% to $ 1.3735, its highest level since May 2018, while the Japanese yen declined slightly to 103.71 per dollar, after a small gain the day before.
The Australian dollar was little changed by $ 0.7744, showing a quiet response to stronger than expected local inflation data.
Oil prices were supported by economic optimism, with futures trading up 0.3% at $ 52.79 a barrel.
The International Monetary Fund raised its forecast for global growth in 2021, as widely expected, and many investors expect the global economic recovery after the pandemic crisis to continue.