US futures edge up after Asian stocks plunge despite Fed chair Jay Powell's dovish comments

• US stock futures nudged higher on Wednesday after Fed chair Jay Powell struck a dovish tone.
• Powell soothed investors' nerves about rising inflation and bond yields.
• Yet Asian tech stocks plunged overnight as investors second-guessed the recent rally.

US stock futures were mostly steady on Wednesday, edging modestly higher after Federal Reserve chairman Jay Powell soothed markets the day before, after stocks tumbled at the start of the week due to worries that rising bond yields could dent the recent rally.

Yet those stock-market jitters hit Asia hard overnight, with equities in China and Hong Kong plunging, as technology firms took a battering.

S&P 500 futures were just 0.02% lower, Nasdaq futures were also down 0.02%, and Dow Jones futures were off by 0.07%.

Overnight in Asia, China's CSI 300 slid 2.55% while Hong Kong's Hang Seng index plunged 2.99%. The Hang Seng tech index - which features big names like Tencent and JD.com - sank 5.1%.

Europe's Stoxx 600 rose 0.13% in morning trading on Wednesday while the UK's FTSE 100 fell 0.36%.

Global stocks have pulled back from record highs in recent days, as rising bond yields and inflation expectations have weighed on investor optimism. Higher yields increase borrowing costs and can make stocks look less attractive - especially fast-growing companies that have not yet turned a profit.

Yet many analysts have said the pull-back from record highs is to be expected given the huge surge in big tech stocks such as Tesla and Amazon over the last 12 months.

However, Powell's semi-annual testimony to Congress eased market fears that the Fed could tighten policy in response to stronger growth expectations, which have been driving up bond yields.

"The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," he said.

Stocks rapidly recovered lost ground, as investors welcomed the signal that the Fed would continue to back the markets, with the Nasdaq Composite closing 0.5% lower but the S&P 500 rising 0.13%.

The tech-heavy Nasdaq 100 ended the day down just 0.22%, having fallen by as much as 3.5% at one point. But this was its sixth straight day of declines and its longest losing streak since a nine-day stretch of losses in late October 2016.

Bond yields pulled back from recent highs as bonds rose. On Wednesday morning, the yield on the 10-year US Treasury note was down 0.2 basis points to 1.362%, off recent highs of around 1.4% but up from around 0.88% in late November.

The dollar index slipped 0.13% to 90.05 on Wednesday in Europe, as bond yields fell back. Lee Hardman, currency analyst at MUFG, said: "The US dollar is underperforming alongside the low-yielding safe-haven currencies of the yen and Swiss franc, while the commodity-related G10 currencies and the pound continue to outperform."

Bitcoin rose around 9% to $50,813, making up some lost ground after plunging to as low as $45,000 on Tuesday.

Jeffrey Halley, senior market analyst at currency firm Oanda, said the drop in Asian stocks overnight was driven by concerns about further US pullbacks.

"At the margins, more tech-heavy Asian markets have underperformed today following the Nasdaq price action overnight, rising inflation fears and a vaccine-led recovery reopening offices."

MUFG's Hardman said he thought "reassuring" comments from Powell should "help to ease some risk of a more disruptive outcome for financial markets in the near-term from a sharper move higher in yields."

On the commodities markets, oil prices inched upwards on Wednesday. Brent crude was 0.31% higher to $64.65 a barrel while WTI crude was up 0.08% to $61.70 a barrel.