Asian Shares slip as Fed, Brexit loom

Asian stocks slipped on Tuesday ahead of the U.S. Federal Reserve's two-day meeting that begins later in the day, amid growing worries this month's referendum in Britain could see it exit the European Union.The pound and euro have suffered in recent sessions as economists fear a so-called Brexit would tip Europe back into recession. Voters appear divided ahead of the June 23 referendum, with the "Out" campaign widening its lead over the "In" camp, according to two opinion polls published by ICM on Monday.Financial spreadbetters predicted the gloom would spread to European trading. Britain's FTSE 100 was seen opening 0.3 percent lower, while both Germany's DAX and France's CAC 40 were expected to fall 0.8 percent. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, after Wall Street lost ground for the third straight session. Japan's Nikkei stock index skidded 1 percent after tumbling 3.5 percent on Monday. "Short-term hedge funds have started betting on Brexit," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. The benchmark 10-year Japanese government bond yield fell to as low as minus-0.175 percent, a fresh record, before edging back to minus-0.170 percent. Uncertainty over this week's Fed meeting has weighed on markets, though the U.S. central bank is widely expected to leave rates unchanged after the much weaker-than-expected May nonfarm payrolls report. "The committee was actively preparing markets for a June-July rate hike until the release of the May employment report and is unlikely to give up its tightening bias absent additional information that labour markets are weakening," analysts at Barclays wrote. "Nevertheless, the abrupt slowing in employment and falling long-run inflation expectations should raise alarm bells, and risk management concerns suggest delaying action until after the outcome of the UK referendum," they said. The Bank of England, Swiss National Bank and the Bank of Japan will also meet this week, and are similarly expected to stand pat on policy with the Brexit vote looming. The dollar index, which tracks the greenback against a basket of six rival currencies, edged up 0.1 percent to 94.472, moving back toward the overnight high of 94.750. That was its highest since the downbeat U.S. jobs report toppled the dollar on June 3. The perceived safe-haven yen has benefited from investors' risk aversion. The dollar was down 0.4 percent at 105.84 yen, moving closer to Monday's low of 105.735, its weakest level since early May. Japanese Finance Minister Taro Aso issued a fresh warning against renewed strength in the yen, saying that he would "firmly respond" if rapid and speculative moves persisted in the foreign exchange market. The euro was 0.2 percent at $1.1276. Against the yen, it skidded 0.6 percent to 119.28, moving back toward a more than three-year low of 119.005 plumbed in the previous session. Sterling also notched a three-year low against the yen of 149.44 on Monday, and was last down 1.3 percent at 149.70 yen. Against the dollar, the pound dropped 0.8 percent to $1.4152. Crude oil prices continued to slip, pressured by the strong U.S. dollar and worrying economic prospects in Europe and Asia, and shrugging off supply fears triggered by ongoing outages in Nigeria. [O/R] Brent was down 0.9 percent at $49.88 per barrel, while U.S. crude shed 1 percent to $48.39. Spot gold was down 0.4 percent at $1,278.30 an ounce. Bullion, which has gained more than 5 percent this month, touched a peak of $1,287.00 on Monday, its highest since May 16. (Source: reuters.com)