BANGKOK, Thailand _ Asian stock markets fell Tuesday as investors braced for a possible first step by the U.S. Federal Reserve to reduce its massive stimulus.
The Fed could announce that it is has decided to scale back its monetary stimulus as soon as Wednesday, when it concludes a two-day policy meeting.
Though hiring and economic growth in the United States remain soft, the Fed is widely expected to slow the pace of its bond purchases. Its purchases of Treasury and mortgage bonds have been designed to keep long-term loan rates low to get people to borrow and spend and invest in the stock market.
Most economists expect the Fed's initial ``tapering'' move to be small _ a reduction in monthly purchases from $85 billion to $75 billion _ especially now that former U.S. Treasury Secretary Lawrence Summers is out of the running for the top Fed job.
World stock markets rose Monday after Summers, who had been the leading candidate to replace Fed chairman Ben Bernanke, pulled his name from consideration. Markets responded positively because Summers was thought to favour quickly reducing the Fed's stimulus.
``Heading into that Fed meeting, there is definitely a lot of cautiousness in terms of the composition of the tapering,'' said Stan Shamu, market strategist from IG in Melbourne, Australia. ``No one is quite sure how it will play out, but I think it warrants a little bit of caution for investors.''
Japan's benchmark index failed to hold on to early gains. The Nikkei 225 in Tokyo fell 0.4 per cent to 14,340.97.
Elsewhere, Hong Kong's Hang Seng fell 0.4 per cent to 23,169.82. South Korea's Kospi fell 0.5 per cent to 2,003.17. Australia's S&P/ASX 200 rose 0.2 per cent to 5,258.40.
Among individual stocks, South Korea's Samsung Electronics fell 2.7 per cent and SK Telecom shed 3.2 per cent.
On Wall Street, the Dow Jones industrial average rose 0.8 per cent, to close at 15,494.78. The Standard & Poor's 500 rose 0.6 per cent, to 1,697.60. The Nasdaq composite fell 0.1 per cent, to 3,717.85.
Benchmark oil for October delivery was down 85 cents to $105.73 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.62 to lose at $106.59 a barrel on the Nymex on Monday.
In currencies, the euro rose slightly to $1.3336 from $1.3335 late Monday. The dollar rose to 99.18 yen from 99.10 yen.