Caution ahead of bank meetings leaves markets mixed

The Bank of Japan (BoJ) and United States Federal Reserve are separately to hold two-day meetings ending Wednesday at which both are expected to keep their respective interest rates at record lows.

Attention will be focused on the banks' outlook for the future as well as any possible monetary moves.

Tokyo closed down 0.28 percent, or 30.27 points, at 10,721.71 and Hong Kong shed 0.27 percent, or 56.17 points, to close at 21,022.93.

Stocks had started the day on a high as bargain hunters moved in following the previous day's losses but they began to fall back as dealers moved to the sidelines before the Fed and BoJ conclude their meetings on Wednesday.

However, Sydney ended 0.27 percent, or 13.1 points, stronger at 4,797.2, while Taipei was up 0.80 percent, or 60.71 points, at 7,695.63.

And Shanghai rallied towards the end of the session to close 0.53 percent higher, adding 15.90 points to end at 2,992.84.

In Japan expectations are for a further loosening of policy as the BoJ tries to boost a stuttering recovery, while the Fed could announce plans to exit its stimulus programme.

The Fed stunned financial markets last month by hiking the interest rate it charges banks for emergency loans.

Some investors, in anticipation of a hawkish comment from the Fed, predict the dollar may rise, but recent remarks by Fed chairman Ben Bernanke suggest chances are low that the bank will keep hiking rates, an analyst said.

Dealers are also awaiting data from the United States, including inflation and unemployment figures, for new clues on the pace of recovery in the world's largest economy.

The Fed said Monday that U.S. industrial production rose just 0.1 percent last month as severe snow storms brought large parts of the country to a halt.

In China airline stocks were lifted after Shanghai Hongqiao airport opened a new terminal as the city gears up for Expo 2010, dealers said.

But Guosen Securities analyst Wang Junqing told Dow Jones Newswires: “There's some bargain hunting following the drop in the past two sessions, but there's still some uncertainty on whether concerns of more tightening measures have gone away completely.”

Jakarta was closed for a public holiday.

In other markets:

— Singapore closed 0.77 percent, or 22.10 points, higher at 2,896.43.

— Seoul closed flat, with the KOSPI edging down 1.49 points to 1,648.01.

— Manila rose 0.27 percent, or 8.34 points, to close at 3,085.13.

— Kuala Lumpur closed flat, losing 0.81 points to 1,298.86.

— Wellington fell 0.72 percent, or 23.35 points, to 3,207.80.

— Bangkok rose 2.36 percent or 17.37 points, to close at 752.20, despite ongoing political protests in Bangkok.

— Mumbai rose 1.27 percent, or 218.19 points to 17,383.18.

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