Asian Markets Drift Ahead of Fed Decision

Asian markets drifted to a mixed close Tuesday, with trade kept largely muted as investors stayed cautious ahead of the U.S. Federal Reserve's rate decision at the its two-day policy meeting starting later today. Japan and Australia closed flat.

U.S. stocks also finished virtually unchanged Monday, though insurance group American International Group dropped 5.6 percent on a media report that it faced more accounting woes ahead.

Energy related stocks gained after an emergency weekend meeting of oil policy makers was seen as doing little to halt the rise in the price of oil, which crept up about 1 percent to $136.82 in New York Monday. Oil traded hovered around $137 in the Asian session amid supply disruptions in Nigeria and tensions between Israel and Iran.

Japan's Nikkei 225 Average dipped 0.06 percent, pinned between JFE Holdings and other steelmakers down on prospects of steep hikes in iron ore prices, while oil-linked shares firmed as crude oil rose for the third straight session. Toyota Motor and other exporters slid as those same high oil prices fanned worries about the U.S. and global economies, while renewed concerns about U.S. financial troubles put financial shares under pressure.

Seoul shares closed slightly lower but POSCO cut earlier losses after news it would hike steel prices and Korea Exchange Bank rebounded after a favorable court ruling.

Australian shares edged up 0.1 percent to end a choppy session just in positive territory, as strength in the big miners on the prospect of a big rise in iron ore prices offset more weakness in banking stocks. Shares in Australia's Origin Energy rose 5.8 percent after British gas producerBG Group launched a hostile A$13.8 billion bid for Origin.

Hong Kong shares closed 1.1 percent lower amid thin volume, with handset maker Foxconn hitting a 2-1/2-year low on worries that market share losses at client Motorola will hurt its bottom line. Aluminum Corp of China slid a further 4.7 percent after Merrill Lynch joined other brokerages in downgrading the stock. CNOOC, one of the most heavily traded stocks of the morning, bucked the broad trend and rallied 3 percent as international crude prices rose for the third straight session on supply disruptions in Nigeria.

China's Shanghai Composite Index jumped 1.5 percent in thin trading, led by bank and property shares, while oil refiners and steel shares weighed on the main index. But Baoshan Iron and Steel tumbled 7 percent after it agreed on the highest price hike in at least a decadefor iron ore term contracts with miner Rio Tinto.

Singapore's Straits Times Index moved 0.4 percent lower with a mixed performance by blue chips. StarHub, the country's second-largest telecoms firm, rose as much as 3.7 percent to hit a two-week high after Morgan Stanley upgraded its ratings for the stock, citing the competitive environment in Singapore's mobile market was expected to stabilize, which would help StarHub's earnings.