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Asian stocks go sideways as investors await Fed meeting, Nikkei stumbles on stronger yen

HONG KONG - Asian stock markets moved sideways on Monday as the turmoil in Iraq dampened sentiment and investors held their fire ahead of the Federal Reserve's monthly policy meeting later in the week.

Japanese stocks slid as the yen strengthened and oil prices hovered at a nine-month high as fears grew that the violence in Iraq could escalate into a broader regional conflict, unsettling global financial markets.

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.

Investors were also readying for the regular meeting of the Federal Reserve Board's policy setting Open Market Committee, scheduled for midweek. While policymakers are widely expected to announce that the Fed will cut its bond-purchase program by another $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.

Japan's benchmark Nikkei 225 tumbled 1 per cent to 14,944.26 as the yen strengthened 0.3 per cent to 101.76 against the dollar. A stronger yen means the cars and electronics produced by Japan's export giants are more costly when sold overseas.

Other Asian benchmarks traded in narrower ranges. South Korea's Kospi was flat at 1,990.81 while Hong Kong's Hang Seng slipped less than 0.1 per cent to 23,308.97. In mainland China, the Shanghai Composite Index added 0.2 per cent to 2,074.53. Australia's S&P/ASX 200 was practically unchanged at 5,404.40.

Benchmarks in Taiwan and New Zealand edged higher while in Singapore, Indonesia and the Philippines drifted lower.

In energy trading, benchmark crude oil for July delivery rose 44 cents to $107.35 in electronic trading on the New York Mercantile Exchange. The contract rose 38 cents to close at $106.91 on Friday.

The euro climbed to $1.3542 from $1.3540.

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