Tokyo, Sep 21 (AP) Asian shares mostly declined on Wednesday as investors looked ahead to a widely expected interest rate hike by the US Federal Reserve as it works to squash the highest inflation in decades.

Japan's benchmark Nikkei 225 dipped 1.4 per cent in morning trading to 27,308.66.

Also Read | PM Narendra Modi's Speech 'Not Time for War' Is a Statement of Principle, Says US Security Advisor Jake Sullivan.

Australia's S and P/ASX 200 dropped 1.4 per cent to 6,712.40. South Korea's Kospi lost 0.9 per cent to 2,346.62.

Hong Kong's Hang Seng shed 1.4 per cent to 18,524.48, while the Shanghai Composite slipped 0.2 per cent to 3,115.08.

Also Read | Pakistan Gets Second Batch of Six J-10C Fighter Aircraft From China: Reports.

Global tensions are adding to uncertainties. Russian-controlled regions of eastern and southern Ukraine have announced plans to start voting this week to become integral parts of Russia.

The Kremlin-backed efforts to swallow up four regions could set the stage for Moscow to escalate the war against Ukraine. Russian President Vladimir Putin recently blasted what he described as US efforts to preserve its global domination and ordered officials to boost weapons production.

“Asian equities traded in a defensive mode on Wednesday. There were some geopolitical tensions concerning Russia and Ukraine, where the separatists are to hold a referendum in some regions, and traders were expecting an update from Putin,” said Anderson Alves at ActivTrades.

On Wall Street, the S and P 500 index fell 1.1 per cent to 3,855.93, as more than 90 per cent of stocks and every sector in the benchmark index lost ground.

The Dow Jones Industrial Average lost 1 per cent to 30,706.23. The Nasdaq composite also fell 1 per cent, to 11,425.05.

The selling came as traders waited to see how high the Fed will raise interest rates at its meeting that ends on Wednesday.

“The market is certainly bracing for the worst and you're seeing a little bit of selling pressure coming in,” said Paul Kim, CEO of Simplify ETFs.

Retailers, technology stocks, health care companies and banks were among the biggest weights on the market. Best Buy fell 4.1 per cent, Microsoft slid 0.8 per cent, Abbott Laboratories dropped 1.7 per cent and JPMorgan Chase closed 2 per cent lower. Exxon Mobil fell 0.8 per cent.

Smaller company stocks fell more than the broader market. The Russell 2000 index gave up 1.4 per cent to 1,787.50.

Bond yields mostly edged higher. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.56 per cent from 3.52 per cent from late Monday and is trading at its highest levels since 2011.

The yield on the two-year Treasury, which tends to follow expectations for Fed action, held steady at 3.95 per cent, hovering around its highest levels since 2007.

Stocks have been slumping and Treasury yields rising as the Fed raises the cost of borrowing money in hopes of slowing down the hottest inflation in four decades.

Fed Chair Jerome Powell bluntly warned in a speech last month that the rate hikes would “bring some pain”.

“He has done everything he possibly can to signal that it's going to be another aggressive move,” said Liz Young, head of investment strategy at SoFi.

The Fed is expected to raise its key short-term rate by three-quarters of a point for the third time at its meeting on Wednesday. That would lift its benchmark rate, which affects many consumer and business loans, to a range of 3 per cent to 3.25 per cent, the highest level in 14 years, and up from zero at the start of the year.

Beyond that, investors will be focused on what Powell has to say, both in the Fed's latest interest rate policy statement and during an afternoon press conference, for clues as to whether the central bank remains primarily focused on lowering inflation, or if there's a hint the Fed is giving more consideration to the impact of higher rates on the economy.

Wall Street is worried that the rate hikes could go too far in slowing economic growth and push the economy into a recession.

Ford fell 12.3 per cent for the biggest decline in the S and P 500 after slashing its third-quarter earnings forecast because a parts shortage will leave it with as many as 45,000 vehicles unfinished on its lots when the quarter ends on September 30.

Last week, FedEx and General Electric warned investors about damage to their operations from inflation.

The US isn't alone in suffering from hot inflation or dealing with the impact of efforts to fight high prices.

The Bank of Japan began a two-day monetary policy meeting on Wednesday, although analysts expect the central bank to stick to its easy monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are next.

In energy trading, US benchmark crude rose 15 cents to USD 84.09 a barrel in electronic trading on the New York Mercantile Exchange.

It fell 1.5 per cent on Tuesday, weighing down energy stocks. Brent crude, the international standard, added 22 cents to USD 90.84 a barrel.

In currency trading, the US dollar inched up to 143.81 Japanese yen from 143.74 yen. The euro fell to 99.64 cents from 99.73 cents. (AP)

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)