* S&P500 slips from record high after earnings disappointment
* Alphabet, Intel jump in after-hour trade
* Bond yields off lows after ECB holds off rate cuts
* ECB widely seen easing its policy in Sept
By Hideyuki Sano
TOKYO, July 26 (Reuters) - Asian share prices dropped on Friday following mixed U.S. earnings reports and after the European Central Bank unexpectedly held interest rates steady, while the euro held above two-year lows struck overnight.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.45% while Japan’s Nikkei lost 0.5%. Shanghai shares ticked down 0.15%.
Wall Street shares fell from record highs on Thursday, with the S&P 500 losing 0.53%, following a flurry of downbeat quarterly results from Ford Motor and other companies.
But several companies that announced results after the market had closed on Thursday generally beat expectations, and their shares rose in after-hours trade.
Google parent Alphabet jumped 7.9%, Intel Corp 5.1% and Starbucks 6.6%. Amazon, however, dipped 1.6% on its first profit miss in two years.
U.S. stock futures rose 0.2% in Asia.
“Some capital goods makers have reported soft earnings but otherwise U.S. earnings have been generally good, partly because investors had already lowered their expectations,” said Hitoshi Asaoka, senior strategist at Asset Management One.
“Still, with U.S. share prices already at record levels, further gains are likely to be limited unless we see clearer signs of recovery in global demand,” he said.
Uncertainties over whether Washington and Beijing will be able to settle gaping differences over trade, technology and even geopolitical ambitions, kept many investors on guard. Negotiators from the two sides will meet in Shanghai next week.
A rally in global bonds ran out of steam after European Central Bank President Mario Draghi cautioned about pulling the trigger too quickly on policy easing, even though he all but pledged to loosen monetary settings further as the growth outlook deteriorates.
Analysts had expected a rate cut by the ECB.
ECB officials told Reuters after the meeting that an interest rate cut in September appeared certain, while government bond purchases and a revamped policy message were also likely.
The euro’s overnight index swaps are pricing in a cut of more than 10 basis points in September, to minus 0.50 percent.
“An interest rate cut of 10 basis points in September looks like a done deal now,” said Hideki Kishida, fixed income strategist at Nomura Securities.
The 10-year German government bond yield initially hit a record low of minus 0.463 percent but ended the day up slightly at minus 0.407 percent.
While European bond yields are likely to stay under pressure until the next ECB meeting on Sept 12, Brexit could become a central issue as investors look to the stance of Britain’s new government under Boris Johnson.
“If there are signs of easing tensions, we could see temporary rise in European bond yields,” Nomura’s Kishida said.
The U.S. 10-year Treasuries yield also rose 3 basis points to 2.079 percent on Thursday and traded at 2.107 percent in the following Asian session.
Also helping to stem falls in bond yields, new orders for key U.S.-made capital goods surged in June, suggesting some improvement in business investment.
Despite that, investors expect the Federal Reserve to cut interest rates by 0.25 percentage point at its policy meeting ending on July 31 to protect the economy from potential damage from the protracted U.S.-China trade war.
An advance reading of U.S. GDP, due at 8:30 a.m (1230 GMT), is expected to show the economy grew 1.8% in April-June, which would be the slowest growth in more than two years.
In the currency market, the euro bounced back to at $1.1149 in Asian trade, after sinking to $1.1101 on Thursday, its lowest since May 2017.
The yen was little changed against the dollar at 108.57 yen per dollar.
Oil prices held firm on rising tensions between the West and Iran and a big decline in U.S. crude stockpiles, though gains were held in check by worries about slowing growth in major economies.
U.S. crude ticked up 0.25% to $56.16 a barrel while Brent futures was almost flat at $63.37 per barrel. (Editing by Simon Cameron-Moore & Kim Coghill)