Asian stocks fall as investors await interest rate decision

BEIJING - Asian stock markets were mostly lower Monday following Wall Street's losses as investors awaited the U.S. Federal Reserve's decision this week on raising interest rates for the first time the financial crisis.

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KEEPING SCORE: Tokyo's Nikkei 225 sank 1.9 per cent to 18,869.25 and Hong Kong's Hang Seng lost 0.8 per cent to 21,285.92 The Shanghai Composite Index bucked the regional trend, rising 0.5 per cent to 3,453.29. Australia's S&P/ASX 200 retreated 1.4 per cent to 4,957.80 and South Korea's Kospi lost 1.1 per cent to 1,927.66. Taiwan, Singapore, Indonesia and Thailand also declined.

FED DECISION: Investors are transfixed by the upcoming Fed announcement Wednesday on whether it will raise a key interest rate that has been held near zero since the 2008 global crisis. Low rates have helped to boost stock prices. Chairwoman Janet Yellen and other Fed officials have indicated employment, inflation and other indicators appear to be headed in the right direction to allow a hike. Analysts expect a modest increase of 0.25 percentage points to start. Yellen has said any further increases will be gradual.

WALL STREET: A decline in oil prices triggered a sell-off Friday that ended with U.S. stocks turning in their worst week since the summer. The S&P 500 index lost 39.86 points, or 1.9 per cent, to 2,012.37. It was down 3.8 per cent for the week, its worst showing since August. The Dow Jones industrial average lost 309.54 points, or 1.8 per cent, to 17,265.21. The Nasdaq composite declined 111.71 points, or 2.2 per cent, to 4,933.47. In Europe, Germany's DAX lost 2.4 per cent, Britain's FTSE 100 dropped 2.2 per cent and France's CAC 40 shed 1.8 per cent.

ANALYST'S TAKE: "Markets are taking a bumpy route to the most awaited event of the year," said Citigroup analysts in a report. They pointed to falling commodity and crude prices, stress in credit markets and uncertainty about China. "These headwinds are likely to keep investors very cautious," they said. "While we still do not rule out a post-FOMC relief rally in risk sentiment, the lack of market liquidity, increasingly obvious growth headwinds, and the lack of global policy support will likely restrain investors' appetite to add bullish positions at this time."

OIL WEAKNESS: Tumbling oil prices have battered energy stocks and fueled a broader selloff. That weakness worsened when the International Energy Agency, the club of major energy-consuming economies, said oil oversupply would persist until late next year even as demand weakens. In the United States, shares of Southwestern Energy plunged 14 per cent on Friday. Freeport McMoRan, a mining giant, dropped 6 per cent.

JAPAN OUTLOOK: The Tankan survey of business conditions was unexpectedly strong, holding steady when forecasters expected a decline. Both manufacturing and non-manufacturing companies reported conditions were unchanged. Since Japanese manufacturers usually report weaker conditions toward the end of the year, the latest result suggests "conditions in the manufacturing sector may actually have improved this quarter allowing for seasonal distortions," said Marcel Thieliant of Capital Economics in a report.

ENERGY: Benchmark U.S. crude shed 20 cents to $35.43 per barrel in electronic trading on the New York Mercantile Exchange. On Friday, it fell $1.14 to close at $35.62. Brent crude, used to price international oils, lost 22 cents to $38.10 in London. In the previous session, it plunged $1.81 to $38.32.

CURRENCY: The dollar gained to 121.10 yen from Friday's 120.96 yen. The euro weakened to $1.0957 from $1.0993.


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