Asian shares struggle

 Asian shares struggled on Tuesday as caution reigned ahead of this week’s US Federal Reserve decision on interest rates, while the yen rose after the Bank of Japan took no new policy steps.

Financial spread betters predicted opening gains for European shares, with Britain’s FTSE 100 seen up as much as 0.3 per cent, Germany’s DAX as much as 0.5 per cent higher, and France’s CAC 40 seen rising as much as 0.6 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan erased early gains and was down 0.7 per cent in afternoon trading, taking its cue from slumping Chinese shares.

China stocks

The Shanghai Composite Index was down 2.5 per cent and the CSI300 index was 2.9 per cent lower in thin trading, with many investors sidelined amid concerns over the market’s direction after a 40 per cent crash over the summer prompted the government to launch a massive rescue package.

“With a slim chance of making a profit in this market, money is not following in,’’ said Zhou Lin, analyst at Huatai Securities.

Japan’s Nikkei stock index ended up 0.3 per cent, though off its morning session highs.

BOJ action

The Bank of Japan held policy steady at the end of its two-day meeting as many had expected, and also warned that slowing demand in emerging markets was taking a toll on Japan’s exports and output.

“There was not a strong expectation for BOJ action, but there was a market reaction after the announcement, showing some were positioning for it,’’ said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.

“The BOJ could have decided to wait to see what the FOMC does this week, before taking any steps of its own,’’ she said.

Later on Tuesday, investors will listen to BOJ Governor Haruhiko Kuroda's post-meeting speech for future policy clues.

Adding to evidence that cooling Asian demand is hurting Japan, a Reuters poll showed Japanese manufacturers’ confidence slumped the most in a year in September.

Yen vs dollar

The Japanese yen turned higher after the BOJ outcome, with the dollar trading at 119.94 yen, down about 0.3 per cent from late US trade.

The euro gave up about 0.2 per cent to 135.72 yen, while it was steady against the dollar at $1.1315.

The dollar index, which tracks the greenback against a basket of six major rivals, was nearly flat at 95.237, well above a three-week low of 94.913 touched overnight.

Aussie hits 2-week high

The Australian dollar hit a two-week high against the dollar and the yen after Australia’s ruling Liberal Party voted out unpopular Prime Minister Tony Abbott. Malcolm Turnbull, a multi-millionaire former tech entrepreneur, was sworn in as prime minister on Tuesday.

On Monday, Wall Street began the week with losses, with US trading volume at its lowest in a month as markets awaited the conclusion of the Fed's two-day meeting on Thursday.

Fed rate hike

Many economists believe that volatile global markets and increasing evidence of slowing momentum in China will prevent the US central bank from raising interest rates for the first time since 2006.

A Reuters poll of 72 economists last week showed a slight majority expect an interest rate rise from the current 0-0.25 per cent, but a smaller sample saw just a 50-50 chance.

Crude oil

In commodities, US crude oil futures clawed back some ground lost in the previous session. US crude rose about 0.4 per cent to $44.16 a barrel, underpinned by data showing a drop in US supplies. It shed 1.4 per cent on Monday.

But Brent crude saw its early gains unravel, shedding about 0.2 per cent to $46.29, after it dropped 3.7 per cent on Monday to its lowest settlement in two weeks.

Spot gold edged down about 0.1 per cent to $1,107.60 an ounce.