UPDATE: Asian Shares Mostly Lower; Fincls Follow US Peers Dn

SINGAPORE -- Asian stock markets were mostly lower Wednesday taking their lead from Wall Street's drop Tuesday. Financial stocks in Asia were generally tracking their U.S. peers lower though Australia's Commonwealth Bank was bucking the trend on strong results.

In New York the Dow Jones Industrial Average closed 1.0% lower at 9241.45, its lowest close since July 31. The Federal Open Market Committee's announcement due later in the global day, and its possible implications for the timing of any policy unwinding, was at the front of people's minds. Dow futures were roughly two points higher in screen trade.

"Investors seem to be nervous after sizable rallies recently, and they also want to check whether the Fed hints at an 'exit strategy' timing during the meeting," said Choi Seong-lak at SK Securities in Seoul said.

Japan's Nikkei 225 was down 0.8%, Australia's S&P/ASX 200 was down 0.1%, South Korea's Kospi Composite was off 1.6% while New Zealand's NZX-50 had eked out a 0.4% gain.

Hong Kong's Hang Seng was 2.3% lower while China's Shanghai Composite was down 2.4% and Taiwan's main index was down 0.4%.

Singapore's Straits Times Index was 0.7% lower and Malaysia's main index was down 0.1%. Indonesian shares were down 1.3% while Philippine shares were down 1.1%. Thai markets were closed.

Still, some market watchers said the FOMC meeting could turn out to be a mild positive for the market. "The expectation is that they (the Federal Reserve) will hold rates steady and paint a better picture of the economy," said AmFraser senior vice president of equity sales Gabriel Gan.

China shares were particularly weak as lower-than-expected new lending and industrial output data released Tuesday weighed. "The sharp decline of new lending and concerns for more tightening of bank loans will dampen investors' previous over-optimistic sentiment," said Shenyin & Wanguo Securities analyst Qian Qimin.

China resources stocks were hit by Tuesday's falls for base metal prices with Yunnan Aluminum down 6.8%.

Hong Kong shares were also weak as profit-taking kicked in with Hong Kong Exchange down 1.0% ahead of its first half results later Wednesday and MTRC down 0.9% after its results.

In Japan, the market was seeing broad-based selling pressure though insurers and autos were particularly weak with Sompo Japan Insurance down 4.5% and Toyota Motor down 1.5%.

Flat-panel makers were a bright spot in Taiwan as investors bet on expected price hikes after Corning Inc. cut LCD glass production due to Japan's recent earthquake with AU Optronics up 5.4% and Chi Mei Optoelectronics up 3.4%.

In Korea, bank, auto and tech stocks were lower with Hyundai Motor down 2.3% and Samsung Electronics down 1.6%.

Asian financial stocks were broadly mirroring weakness in their U.S. counterparts with Mitsubishi UFJ Financial Group down 1.1%, Mizuho Financial Group down 1.3% and KB Financial Group off 4.1%.

But in Australia, banks were posting gains and supporting the market after Commonwealth Bank reported better-than-expected profit for fiscal year 2009. Credit Suisse analysts called the results strong, and "backed by quality." The bank's stock had risen 2.0%, peer Westpac Banking Corp was 1.7% higher.

A continued strong performance from Qantas Airways, up 1.6%, and Flight Centre, up 12.6%, was also supporting the market after Flight Centre Tuesday said both companies agreed on "reasonable commercial terms" to retain their partnership next year.

Shares in New Zealand were faring better than the rest of the region as gains in heavyweight Fletcher Building, following its in-line full year results, were supporting the market. The company's stock was up 6.1%.

The U.S. dollar and euro were weaker against the yen as falls for Asian equity markets fueled risk aversion with some selling ahead of the FOMC statement on an expectation that the statement may be somewhat hawkish and could signal a near-term end to the bond-buying program.

The euro was at Y135.09 from Y135.74 and at $1.4142 compared with $1.4154 late in New York trade. The dollar was at Y95.48 compared with Y95.93.

Japanese government bonds were higher in a quiet summer holiday-affected market after U.S. equities slid and the Nikkei followed them lower, also after U.S. Treasurys gained. Also, "I think people are just waiting for the FOMC meeting (outcome) tonight," said Mitsubishi UFJ Securities strategist Naomi Hasegawa. Lead JGB futures were up 0.14 point at 137.34 with the 10-year yield down one basis point from Tuesday's close at 1.435% on buying spurred by lower U.S. long-term interest rates and a fall in Tokyo equities.

Base metals were a tad higher on continued expectations of a global economic recovery. Players were waiting for U.S. industrial production and inflation data, due to be released Friday, and the result of the FOMC's meeting later.

Analysts at Standard Bank said they expect the data to follow a similar vein to the Chinese CPI and industrial output data Tuesday with an improvement in industrial production growth, coupled with benign inflation.

"However, we expect the recovery in industrial production to justify metals' and energy products' current price levels, rather than support a further rally."

LME three-month copper was up $36 at $6,075 per metric ton, three-month aluminum was up $12 at $1,940 per ton.

Crude oil futures were slightly higher after dropping for a fourth-straight session in New York as lower equities and concerns about future oil demand weighed. The September Nymex crude futures contract was up 12 cents at $69.57 per barrel.

Spot gold was inching higher at $947.70 per troy ounce, up $2.40 from the close in New York though physical interest was muted as traders said the focus was on the U.S. Federal Reserve's announcement later.