Asian stocks and oil prices retreated from their peaks on Tuesday and the dollar halted its slide as investors held their fire ahead of a U.S. Federal Reserve policy meeting, where an interest rate cut is widely expected.

European stocks also looked set for a weaker start, with financial bookmakers in London expecting Britain's FTSE 100 index to open between 17 and 19 points lower, the German DAX down 24 to 32 points and the French CAC 40 15 to 22 points lower.

U.S. crude slipped below $93 a barrel, off a record high of $93.80 set on Monday, while gold lost its grip on a 28-year high as a five-day run sputtered to a halt.

Due to kick off later in the day, the two-day Fed meeting is seen likely to conclude with another cut to the 4.75 percent fed funds rate as the U.S. central bank tries to stave off economic damage from a mounting housing slump and credit market problems.

At the September meeting, the Fed slashed interest rates by a bold 50 basis points, setting alight global stock markets.

Investors were also awaiting a policy meeting of the Bank of Japan. The BOJ is expected to keep interest rates unchanged at 0.50 percent on Wednesday, but is seen cutting its economic growth and inflation forecasts and stressing more downside risks in its half-yearly outlook.

Tokyo's Nikkei average ended 0.3 percent lower, following Monday's 1.2 percent rise, while MSCI's measure of other Asia Pacific stocks slipped 0.6 percent by 2:11 a.m. EDT.

On Monday, the MSCI index climbed 2.5 percent to a second straight record closing high, bringing total gains this year to 48 percent -- more than triple the gains for MSCI's main world equity index

Investors stand on the sidelines as they cannot yet predict what the market reaction, especially in New York, will be like after the widely expected rate cut, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

Markets in the region were mixed with Australia, South Korea and Taiwan all closing lower, but Hong Kong's Hang Seng Index was up 0.1 percent by the midday break, underpinned by strong fund flows.


Amid growing caution ahead of the Fed meeting outcome, investors took their cues from corporate earnings and outlooks.

Those that disappointed by cutting or warning about their earnings outlook were heavily punished. Microchip tester-maker Advantest Corp dropped 3.4 percent, Kookmin Bank slid 4.1 percent and Seiko Epson slumped 5.6 percent.

Takeda Pharmaceutical skidded 12.4 percent on concerns that a potential source of earnings will be lost after U.S. health authorities recommended the firm stop some clinical trials of its cholesterol-lowering TAK-475, a key drug candidate for the company.

Stocks that have gained strongly recently were also on the back foot. Resource names that have benefited from the climb in commodity prices, led by oil, were mostly weaker. Mining giant BHP Billiton eased 0.9 percent and top zinc refiner Korea Zinc slipped 2.9 percent.

There will be some pullback as metals weren't all that hot last night and traders were tempted to take a little bit off the table, said Lucinda Chan, a division director at Macquarie Equities in Sydney.

U.S. crude fell 0.7 percent to $92.87 on expectations that American crude inventories rose last week heading into the peak winter demand season, while gold slipped to a low of $782 an ounce and base metals eased, with Shanghai copper down 1.8 percent.


After five straight sessions of declines, the dollar finally found some traction. Its trade-weighted index against six major currencies edged up 0.1 percent to 76.915, off Monday's trough of 76.777 -- the lowest in the index's more than 30-year history.

The euro dipped below $1.44 after hitting an all-time high near $1.4440 on Monday and it slipped below 165 yen from a high of about 165.50 yen in the previous session.

Against the Japanese unit, the dollar fetched 114.48 yen after rebounding to near 115 yen on Monday.

Some traders said the dollar was helped by a Wall Street Journal report on Tuesday that said a Fed cut this week was not a done deal and officials were not seriously considering a 50 basis point cut.

The market is very nervous right now before the Fed's decision, because even when the market is widely expecting a 25-basis point rate cut, there are still some risks for other scenario, said a director at an European bank.

With the focus on a U.S. rate cut, short-dated Japanese bonds, which are more sensitive to changes in the cash rate, outperformed their longer-dated counterparts.

The yield on the benchmark 10-year Japanese government bonds (JGBs) edged up one basis point to 1.615 percent, while the yield for 2-year JGBs eased half a tick to 0.765 percent.