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Markets tread with caution ahead of Fed meeting this week

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Markets tread with caution ahead of Fed meeting this week

➤ Asian stocks post modest gains; retail weighs on European markets.

➤ Fed widely expected to raise rates this week; BoE, BoJ decisions also due.

➤ Treasury yields unchanged; dollar dips against majors.

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Futures point to a muted opening for Wall Street while Treasurys held steady as investors await the U.S. Federal Reserve's monetary policy meeting this week.

Japan's Nikkei 225 index closed 0.62% higher, while the Shanghai SE Composite rose 0.16% and Hong Kong's Hang Seng was little moved. China will hold its Central Economic Work Conference starting tomorrow amid concerns on the country's slowing economic growth and persistent trade tensions with the U.S.

European shares edged lower, with the FTSE 100 index dipping 0.49% as of 7 a.m. ET, the Euro Stoxx 50 down 0.52% and the wider Stoxx Europe 600 slipping 0.60%. Retail companies were particularly hit, with shares in AIM-listed Asos PLC plummeting 40% after the online fashion retailer slashed its sales growth guidance for its current fiscal year.

Shares in blue-chip retailers Next PLC and Marks and Spencer Group PLC lost 4% and 3%, respectively, in London, while shares in adidas AG and Puma SE dropped approximately 4% each in Frankfurt and H&M Hennes & Mauritz AB (publ) lost 8% in Stockholm.

Car makers Daimler AG and Bayerische Motoren Werke AG were among the top gainers in Germany's DAX index, which dipped 0.49%. China's decision last week to temporarily suspend additional tariffs on American automobile exports is seen as a win by U.S. and European auto producers, although some analysts say the 90-day period for the U.S. and China to reach a trade deal will not be enough time to help stifled exporters return to pre-trade-war export levels.

Meanwhile, yields on 10-year U.S. Treasurys were broadly steady at 2.885% and the dollar index, which measures the currency against a basket of major peers, dipped 0.24% as investors await the Federal Reserve's last monetary policy meeting of the year, with a rate increase widely expected.

Investors will closely monitor the Federal Open Market Committee's meeting for the dot plot, which is used by FOMC members to indicate where they think rates will be in the future, amid growing skepticism of the Fed's policy tightening for next year, according to strategists at ING.

"We think the Fed will continue to signal three hikes next year but see risks that the 2020 and 2021 dots are lowered," Danske Bank said in a research note last week. The Bank of England and the Bank of Japan are also due to release monetary policy decisions this week, as aare Sweden's Sveriges Riksbank and the Bank of Thailand, among others.

During the last quarter of 2018, prices fell for many asset classes as central banks raised interest rates and slimmed balance sheets, and these tensions in financial markets are the first of several "bumps in the road" expected as central banks move toward their pre-crisis monetary policy settings, the Bank for International Settlements said in its quarterly review.

In other currencies, the pound edged 0.45% higher against the dollar, while the euro rose 0.34%. The Chinese yuan gained 0.15% versus the dollar.

Among commodities, Brent crude oil gained 1.13% to $60.96 per barrel on the ICE Futures Exchange. Gold rose 0.16% to $1,243.40 per ounce.

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The day ahead:

8:30 a.m. ET — U.S. Empire State manufacturing survey (Econoday consensus: 21.0)

10 a.m. ET — U.S. NAHB housing market index (Econoday consensus: 61)

4 p.m. ET — U.S. Treasury International Capital