Tokyo stocks hit by Abe worries, Asian dealers await Fed

Traders have been spooked as Prime Minister Shinzo Abe (L) and Finance Minister Taro Aso are embroiled in a cronyism scandal

Tokyo sank on Monday as Japanese Prime Minister Shinzo Abe's political future hangs in the balance over a cronyism scandal, while Asian traders moved cautiously before a crucial US Federal Reserve meeting.

After fluctuating last week on worries about a possible global trade war and Donald Trump's removal of moderate voices in his cabinet, regional equities are struggling to maintain a run of gains.

Investors are also keeping an eye on Washington after another outburst by Trump against a probe by special counsel Robert Mueller into claims of Russian meddling and collusion with the tycoon's campaign in the 2016 presidential election.

There are fears in some quarters that Trump is planning to fire Mueller. Greg McKenna, chief market strategist at AxiTrader warned that if he did, then "all heck could break loose on markets".

In Japan, the Nikkei finished 0.9 percent lower as Abe and Finance Minister Taro Aso are embroiled a scandal over the cut-price sale of government land to a supporter of the prime minister to open an elementary school.

The finance ministry has admitted altering documents related to the deal.

A weekend poll by the Asahi Shimbun daily found public support nosediving 13 percentage points from a month ago to 31 percent, the lowest since Abe took power in December 2012.

Abe denies any wrongdoing.

- 'Struggling' -

Among other markets Shanghai ended up 0.3 percent. Earlier, it emerged that reformer and US-educated Yi Gang was the only nominee to take over as governor of the People's Bank of China.

Yi recently said the central bank would work to push through reforms that will bring about "equal treatment for domestic and foreign investors".

Hong Kong finished marginally up. But CK Hutchison Holdings fell more than two percent after the city's richest person and investment "Superman" Li Ka-shing announced Friday he would step down as chairman.

CK Asset Holdings fell 0.6 percent.

Elsewhere Sydney added 0.2 percent, but Singapore fell 0.1 percent, Seoul dropped 0.8 percent and Manila lost 0.8 percent. There were also losses in Bangkok, Jakarta and Wellington.

The key event this week is the Fed's next policy meeting, which will be the first for new boss Jerome Powell. The bank is expected to raise interest rates again but Powell's remarks will be closely followed for clues about future increases, with some predicting another three this year in light of an improving economy.

"Markets are struggling to stay positive given the torrent of potential headwinds. Whether it's the White House revolving door, an escalation of a global trade war or Japan's brewing political scandal, markets are grappling to find an equilibrium," said Stephen Innes, head of Asia-Pacific trading at OANDA.

"But when you toss in the prospect of a more hawkish Fed, it's not surprising risk sentiment continues to trade poorly."

Oil prices fell on worries about increasing US production after drillers brought more rigs back online, offsetting a Russia-OPEC cap that was agreed in a bid to drain a global glut.

"US shale production's rapid growth continued to be flagged by both OPEC and (the International Energy Agency) as a threat and potential cap to oil prices with its persistent growth seen in rig and production count," Benjamin Lu, of Phillip Securities, said in a note to clients.

London opened 0.1 percent lower, while Paris and Frankfurt were each down 0.4 percent.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 21,480.90 (close)

Hong Kong - Hang Seng: FLAT at 31,513.76 (close)

London - FTSE 100: DOWN 0.1 percent at 7,157.58

Euro/dollar: DOWN at $1.2270 from $1.2286 at 2100 GMT on Friday

Pound/dollar: DOWN at $1.3930 from $1.3936

Dollar/yen: DOWN at 105.88 yen from 105.97 yen

Oil - West Texas Intermediate: DOWN 25 cents at $62.09 per barrel

Oil - Brent North Sea: DOWN 26 cents at $65.95 per barrel

New York - Dow: UP 0.3 percent at 24,946.51 (close)