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World stocks mostly decline as investors await Fed

HONG KONG--World stock markets mostly declined Monday as the turmoil in Iraq dampened sentiment and investors held back ahead of the Federal Reserve's monthly policy meeting later in the week.

Iraq's prime minister vowed on Sunday to “liberate every inch” of territory captured by the Islamic militants who posted photos that appeared to show their gunmen massacring scores of captured Iraqi soldiers.

“Reports that Iraq has entered a full blown sectarian conflict is ensuring a thread of anxiety is running through markets,” analysts at Rabobank wrote in a research note.

In early European trading, France's CAC-40 fell 0.4 percent to 4,524.90 while Germany's DAX shed 0.3 percent to 9,885.46. The FTSE 100 index of leading British companies slipped 0.1 percent to 6,768.64.

U.S. stocks were poised to open lower, with Dow futures down 0.2 percent to 16,669.00. S&P 500 futures dipped 0.2 percent to 1,924.20.

Investors were also readying for the regular meeting of the Federal Reserve Board's policy setting Open Market Committee (FOMC), scheduled for midweek. While policymakers are widely expected to announce that the Fed will cut its bond-purchase program by another US$10 billion, investors will be examining their comments on the outlook for raising interest rates, economic growth and inflation.

“The FOMC statement in the early hours of Thursday morning is undoubtedly the primary focus for all global markets this week,” said Niall King, a sales trader at CMC Markets in Sydney.

Asian shares were mixed on Monday, with initial losses recouped in some markets but gains capped by fears over the Iraq crisis that has sent oil prices to nine-month highs.

Tokyo tumbled 1.09 percent, or 164.55 points, to finish at 14,933.29 as the strong yen hit exporters.

But Sydney edged 0.13 percent higher, adding 7.25 points to 5,412.3, while Seoul gained 0.14 percent, or 2.74 points, to 1,993.59.

Hong Kong was flat, edging down 18.50 points to 23,300.67. Shanghai added 0.74 percent, or 15.26 points, to 2,085.98 following more upbeat data on the world's number two economy last week.

Investors are nervously tracking events in Iraq as Islamic militants sweep though the country, taking over key cities and moving towards Baghdad as the U.S.-trained Iraqi army crumbles.

U.S. President Barack Obama has raised the prospect of air strikes on the militants, saying his national security team is “looking at all the options”. But while an aircraft carrier group has been deployed to the Gulf, he has ruled out any return of combat troops.

Washington is also preparing to hold talks with Iran to try to resolve the crisis, a report said, as the U.S. condemned a “horrifying” massacre by Islamic militants of hundreds of Iraqi soldiers.

On Wall Street Friday the Dow rose 0.25 percent, the S&P 500 added 0.31 percent and the Nasdaq put on 0.30 percent. However, the indexes were all lower over the week.

The price of gold, a safe haven commodity, switched upwards, fetching US$1,280.00 an ounce at 1055 GMT compared with US$1,272.04 late Friday.

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