The Fed’s annual central banking symposium kicks off later this week in Jackson Hole, Wyoming, with a speech from Fed Chair Janet Yellen on Friday. The Nikkei average dropped 100.83 points or 0.61 percent to 16,497.36 and the broader Topix index closed 0.47 percent lower at 1,297.56.
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The Fed is on the sidelines since December last year, when it raised interest rates after seven years of the most accommodative monetary policy in US history.
But response has been very muted in relality with the market pricing around a 25-percent- and 50-percent-chance of a September and December hike respectively, it added.
On Wall Street, the Dow .DJI had ended Monday down 0.12 percent, while the S&P 500 .SPX lost 0.06 percent and the Nasdaq .IXIC added 0.12 percent. The euro was flat at $1.1262 EUR= after edging down 0.4 percent overnight. Oil remained under pressure after shedding 3% on Monday. Prices retreated from two-month highs on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising USA oil rig count.
Biotech stocks received a boost from Pfizer’s $14 billion acquisition of cancer drug maker Medivation, which jumped almost 20%.
Brent crude LCOc1 lost 53 cents to $48.63 a barrel.
Of the 479 companies in the S&P 500 that have reported earnings, 71% have topped expectations, according to Thomson Reuters data.
The bump in new home sales helped the US dollar trim losses, though the greenback was still down 0.11 percent to 94.42 against a basket of major currencies. The index fell about 1.3 percent last week on what traders perceived as mixed signals from Fed officials. Earnings are now showing a decline of 2.3% for the quarter. Market bellwether Samsung Electronics rallied 1.3 percent to hit a record high on expectations that it would continue to deliver solid earnings in the second half of 2016. USA crude futures CLc1 fell 66 cents to $46.75, after the September contract expired on Monday at $47.05.
In currencies, the dollar was 0.1 percent higher at 100.48 yen (JPY=), inching away from the 100-yen level under which it has dipped in recent sessions.
The euro firmed to $1.1321 as one major bank decided the news had been good enough that the European Central Bank will not need to cut its interest rates any deeper into negative territory, as it had previously expected.
Investors are anxious to see whether Yellen will echo the hawkish views expressed by Fischer and New York Fed President William Dudley, or take a more subdued stance in line with the July Fed policy meeting minutes, which suggested the central bank was not in a hurry to raise rates.
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The kiwi dollar (NZD=D4) rose around a third of a cent to $0.7310 in reaction.
