GLOBAL MARKETS-Asia stocks cautious before Fed, oil on defensive

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Wait-and-see mood ahead of Fed meeting keeps stocks tight
range
* Fed begins 2-day policy meeting later on Tuesday
* Oil extends fall, growth woes outweigh Middle East
concerns

By Shinichi Saoshiro
TOKYO, June 18 (Reuters) - Investor caution ahead of the
Federal Reserve's interest rate meeting capped Asian stocks on
Tuesday, while crude oil prices retreated as global growth
worries overshadowed supply concerns stemming from recent Middle
East tensions.
The Shanghai Composite Index .SSEC lost 0.25%, Hong Kong's
Hang Seng .HSI rose 0.15% and Japan's Nikkei .N225 dipped
0.3%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS edged up 0.2%.
Bucking the trend were Australian stocks .AXJO , which rose
0.3% after minutes from the Reserve Bank of Australia's (RBA)
last policy meeting pointed to the possibility of another
interest rate cut.
The Fed, facing fresh demands by U.S. President Donald Trump
to cut interest rates, begins a two-day meeting later on
Tuesday. The central bank is expected to leave borrowing costs
unchanged this time but possibly lay the groundwork for a rate
cut later this year. Fresh hopes for looser U.S. monetary policy have been a
tonic for risk assets markets, which were buffeted last month by
an escalation in the trade conflict between Washington and
Beijing. The S&P 500 .SPX has gained 5% this month after
sliding in May on trade war fears.
"In just a few months, the market has turned from being
guided by the Fed to actively guiding the Fed," wrote interest
rate strategists at Bank of America Merrill Lynch.
Focus is now on how close the Fed could be to cutting
interest rates amid the raging U.S.-China trade war, signs of
the economy losing steam and pressure by President Trump to ease
policy.
"The FOMC (Federal Open Market Committee) meeting is the
week's biggest event so there will be a degree of caution
prevailing in the markets," said Masahiro Ichikawa, senior
strategist at Sumitomo Mitsui DS Asset Management.
"Expectations for a rate cut in July have increased
significantly, so the markets could experience disappointment if
the Fed does not send strong signals of impending easing."
U.S. Treasury yields dipped on Monday after the New York
Fed's "Empire" gauge of business growth in the state showed a
fall this month to its weakest in more than 2-1/2-years, fanning
rate cut expectations. The dollar index .DXY against a basket of six major
currencies stood little changed at 97.468 after pulling back
from a two-week high on the decline in Treasury yields.
The Australian dollar AUD=D4 fell to a fresh five-month
low of $0.6851 after minutes from the RBA's June meeting showed
the central bank thinks it may have to ease policy again to push
down unemployment and revive wages and inflation. The central bank cut rates to a record low of 1.25% at its
meeting earlier this month, to support the slowing economy.
The pound GBP=D4 extended an overnight slump and brushed
$1.2512, its lowest since Jan. 3. Concerns that arch-Brexiteer
Boris Johnson will replace Theresa May as prime minister have
dogged sterling. GBP/
The euro EUR= was a shade higher at $1.1231 after spending
the previous day confined to a narrow range.
U.S. crude oil futures CLc1 shed 0.13% to $51.86 per
barrel after retreating 1.1% the previous day and Brent crude
LCOc1 lost 0.2% to $60.81 per barrel following Monday's loss
of 1.7%.
Oil prices had fallen on Monday as weak Chinese economic
data released at the end of last week led to fears of lower
global demand for the commodity. O/R
Concerns over weakening demand overshadowed tensions in the
Middle East, which remained high following last week's attacks
on two oil tankers in the Gulf of Oman.

(Editing by Sam Holmes)