Markets flat ahead of Fed meeting

HONG KONG, May 9 (Reuters) Asian stock markets were subdued on Tuesday, following a glowing performance in the previous session, as investors turned cautious ahead of a U.S. Federal Reserve meeting due mid-week.

While another U.S. interest rate hike is widely expected at the May 10 meeting, investors are keen to see if the central bank will signal its intent to pause its tightening campaign.

Disappointing earnings from Dell Inc., whose quarterly profit fell short of the company's forecast in a preliminary earnings report, also weighed on some tech issues.

At 0025 GMT, Tokyo stocks had slipped 0.09 percent, paring Monday's 0.8 percent gain, as chip equipment maker Advantest Corp. shed 1.1 percent and electronics parts maker Kyocera slipped 0.9 percent.

''Ahead of the Fed meeting, investors in the U.S. are holding back, so it is only natural that we'll also see a similar situation in Japan,'' said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

A firm yen was also hurting exporters including Canon and Sony.

South Korean stocks edged 0.17 percent lower after Monday's 0.78 percent rise to a record close of 1,452.23, further pressured by a consumer sentiment report that fuelled concerns that domestic demand growth was softening.

Analysts said a stronger won currency and surging oil prices had been expected to dampen consumer sentiment.

''Although it had been expected to some degree that consumer sentiment could be impacted, this will likely have a negative effect in the market,'' said Choo Hee-yeop, deputy general manager of asset management strategy at Korea Investment and Securities.

Among the early decliners were SK Telecom, Woori Financial Group and retailer Lotte Shopping, all down more than 1 percent.

Australian shares dipped 0.06 percent following a 1.3 percent gain on Monday, as investors waited for the government to unveil its 2006/07 budget, due after the market close. There is speculation it will include further tax cuts.

Shares in Orica climbed 1.8 percent after the explosives maker said it would sell down its 70 percent stake in fertiliser company Incitec Pivot A source told Reuters Orica was planning to sell Incitec shares in a band of A.30-A.00 each. Incitec shares were on a trading halt.

On Wall Street, the blue-chip Dow crept up 0.06 percent while the tech-laden Nasdaq Composite Index put on 0.10 percent as investors retreated to the sidelines ahead of the Fed meeting.

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