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September 26, 2017

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Asia markets, oil pressured ahead of OPEC meet

HONG KONG -- Asian markets struggled Wednesday as oil prices staged a mild recovery from the previous day's sharp sell-off, with investors growing uneasy over the chances of an output-cutting deal at a crunch OPEC meeting.

Some of the biggest producers in the world head into the Vienna conference no closer to compromise on the details of a September agreement to address a glut that has battered crude markets for two years.

Uncertainty over the deal — with Iran and Iraq calling to be excluded and Russia looking only to freeze, rather than cut — has fueled volatility on oil trading floors in the past week and on Tuesday both main oil contracts plunged 4 percent.

And while Brent and West Texas Intermediate recovered slightly in early Asian trade, investors were still moving cautiously.

"All eyes will be on Vienna today with Iran and Iraq both digging their respective heels in on production caps," Jeffrey Halley, senior market analyst at OANDA, said.

"Failure to come up with a viable solution will see oil much lower tomorrow. The convoluted nature of the negotiations means compliance going forward will be an issue as well, one suspects."

Worries about oil have weighed on global equities, which have enjoyed a strong few weeks since Donald Trump's shock U.S. election win, on hopes his policies will ramp up economic growth.

All three main New York indexes rose Tuesday after data showed stronger-than-expected third-quarter U.S. growth, higher housing prices in September and a sharp rebound in consumer confidence in November.

But Asian investors were a little more subdued and Tokyo ended flat, while Hong Kong ended 0.2 percent higher.

Shanghai sank one percent, Sydney was 0.3 percent lower, and Seoul added 0.3 percent while Singapore put on 0.7 percent.

In early European trade London and Frankfurt were flat, while Paris dropped 0.1 percent.

The U.S. dollar recovered early losses against the yen, euro and pound to edge up in the afternoon as investors bet on sharper rises in U.S. interest rates.

But the greenback was down against most high-yielding units in the region, having surged to multi-month highs against them last week.

The won was up 0.1 percent, the yuan was 0.3 percent higher — though still at around eight-year lows — and the Indian rupee added 0.2 percent, having hit a record low last week. The Australian dollar and Malaysia's ringgit were also stronger.

Investors are also awaiting a referendum Sunday in Italy on constitutional reform. Prime Minister Matteo Renzi has suggested he will step down if voters reject the proposal.

There are fears his resignation could spark elections in which populist anti-euro parties could do well, and possibly even lead to the country leaving the EU.

Also on the horizon this week are the release of U.S. jobs data and a slew of manufacturing indicators that could provide a better handle on the state of the world's top economies.

Key Figures around 0800 GMT

Tokyo — Nikkei 225: FLAT at 18,308.48 (close)

Hong Kong — Hang Seng: UP 0.2 percent at 22,789.77 (close)

Shanghai — Composite: DOWN 1.0 percent at 3,250.03 (close)

London — FTSE 100: FLAT at 6,770.07

Euro/dollar: DOWN at US$1.0624 from US$1.0650 Tuesday

Dollar/yen: UP at 112.80 yen from 112.36 yen

Pound/dollar: DOWN at US$1.2470 from US$1.2490

Oil — West Texas Intermediate: UP 33 cents at US$45.56 a barrel

Oil — Brent North Sea: UP 50 cents at US$46.88

New York — Dow: UP 0.1 percent at 19,121.60 (close)

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