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.
European equities are expected to decline somewhat, with EuroStoxx 50 futures falling 0.3% and FTSE futures falling 0.4%.
The MSCI’s valuation of Asian stocks ex-Japan fell 0.2%, pulled down by the realization of profits in resource stocks, as some investors were cautious about the stretched valuations.
“The global economy appears to be losing some momentum and there is still no clear sign that COVID-19 infections are decreasing, even after vaccinations have started in some places. I hope that the shares will be stuck in a range for a while, ”said Hisashi Iwama, senior portfolio manager at Asset Management One.
But the technology sector remained a bright spot after Microsoft’s profits raised Nasdaq futures by 0.5%, while Japan’s Nikkei also rose 0.3%.
Microsoft’s shares rose 3.7% in the trading period after its Azure cloud computing services grew 50%, boosting optimism for other U.S. tech giants, including Apple and Facebook, 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 Morgan Stanley Securities.
“The shares of these technology companies have been somewhat stagnant since August, but they are expected to lead the market again, due to their solid prospects,” he said.
At its peak in August, the combined market capitalization of the five largest US technology companies, which also include Amazon and Alphabet, reached 24.6% of the US blue chip S & P500 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.
An increase in stock in the video game company Gamestop driven by retail investors has also raised concerns that a rise driven by loads of stimulus money from governments and central banks has become extreme.
Still, analysts expect the U.S. Federal Reserve to maintain its dovish tone to help accelerate the economic recovery when it concludes its two-day monetary policy meeting on Wednesday.
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 1.035%, having hit a three-week low of 1.028% on Tuesday with growing speculation that Biden may have to pull back 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 dollar index flirted with this week’s low at 90.204, while the euro held steady at $ 1.2161.
The pound sterling 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 moderate response to stronger than expected local inflation data.
Oil prices were supported by economic optimism, with US oil futures trading 0.6% higher at $ 52.95 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.
Editing by Lisa Shumaker and Sam Holmes