Equity markets ease after four-week rally; Fed meeting eyed

By Chuck Mikolajczak

NEW YORK (Reuters) - Global equity markets slipped on Monday, pausing after a four-week rally ahead of policy announcements from central banks in the United States and Japan later in the week, while the dollar weakened in the wake of soft U.S. housing data.

Stock markets rallied last week on the potential that Japan's already-massive stimulus would be further increased after China cut interest rates last week and the European Central Bank indicated it may add to its asset purchase program in December.

But comments Monday by a key economic adviser to Prime Minister Shinzo Abe, who said the Bank of Japan did not need to boost its monetary stimulus this week, tamped down those expectations somewhat.

The U.S. Federal Reserve, meanwhile, will issue a policy statement at the conclusion of a two-day meeting on Wednesday. It is increasingly expected to hold off its first rate hike in nearly a decade until next year.

U.S. stocks dipped, with the PHLX housing index <.HGX> down 0.4 percent after the Commerce Department said new U.S. single-family home sales fell to near a one-year low in September after two straight months of gains.

"I kind of expected it to be stuck in neutral," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

"People are just sitting tight waiting for the Fed meeting, although frankly it is going to be a non-event. That doesn't mean people won't get a little concerned about it."

FOUR-WEEK RALLY

After a gain of more than 7 percent over the past four weeks, MSCI's all-country world index of the equity performance of 46 countries shed 0.1 percent, while the pan-regional FTSEurofirst 300 index, tracking Europe's 300 largest companies, closed down 0.4 percent.

Shares in European markets were mostly lower, but Germany's DAX <.GDAXI> managed a modest 0.06 percent gain after a business sentiment survey showed that morale had fallen by less than expected in October.

The Dow Jones industrial average fell 23.65 points, or 0.13 percent, to 17,623.05, the S&P 500 lost 3.97 points, or 0.19 percent, to 2,071.18 and the Nasdaq Composite added 2.84 points, or 0.06 percent, to 5,034.70.

About 170 companies in the benchmark S&P 500 index are expected to report earnings this week, including Apple Inc on Tuesday.

Thomson Reuters data shows third-quarter earnings are expected to decrease 2.8 percent from a year ago, a slight improvement from the 4.2 percent decline expected at the beginning of the month.

The dollar fell from a 2-1/2 month high and was off 0.3 percent to 96.837 against a basket of major currencies on lower U.S. bond yields and the U.S. new-home sales data.

Crude oil prices fell, as U.S. crude settled down 1.4 percent to $43.98 and Brent settled 0.9 percent lower to $47.54 a barrel on worries that the oversupply in oil products would swell from unseasonably warm weather and the waning maintenance cycle for U.S. refineries.

U.S. natural gas futures briefly fell 10 percent to a fresh three-year low as the market focussed on forecasts for continued warm weather at the start of the winter heating season.

Prices on 10-year Treasuries were up 8/32 to yield 2.0564 percent, down from two-week highs.

(Editing by Bernadette Baum and Nick Zieminski)