* Asian shares ease, Nikkei backs off 10-month high
* Oil rises towards $70 a barrel after U.S. crude stocks
fall
* Yen holds firm after strong gains the previous day
* Fed statement awaited for rates and recovery prospects
(Repeats to more subscribers)
By Charlotte Cooper
TOKYO, Aug 12 (Reuters) - Asian shares sagged on Wednesday
after losses on Wall Street and as investors locked in profits
as they waited to hear what the U.S. Federal Reserve would say
about prospects for recovery in the world's largest economy.
Shares in Seoul and Tokyo fell while the MSCI index of
Asian markets excluding Japan <.MIAPJ0000PUS> slipped 1
percent, still in retreat from last week's 11-month peak.
The Fed started its two-day meeting on Tuesday, with
expectations that it will leave benchmark interest rates near
zero and let a $300 billion programme to buy Treasury
securities expire on schedule in September as economic gloom
lifts.
But after a report showing U.S. firms continue to cut
inventories as they lack confidence in the economy, analysts
expect the Fed will try to dampen speculation about higher
interest rates while still supporting hopes that the makings of
a recovery are at hand.
Its statement is due at about 1815 GMT.
In Tokyo the Nikkei <> pulled back from 10-month
highs, with Japan's No. 2 drug company, Astellas Pharma
<4503.T>, down after a ratings downgrade following news that a
Novartis unit had launched a generic version of Astellas' key
Prograf transplant drug. []
"There's some concern that the Nikkei has been overbought,
and that put together with inability to read what the Fed might
do is leading to profit-taking," said Takashi Ushio, head of
the investment strategy division at Marusan Securities.
Chinese stocks tumbled, with the Shanghai Composite Index
<> falling 3 percent to four-week lows on worries about a
possible tightening of market liquidity following a sharp drop
in bank lending in July. The Hang Seng index <> fell 2
percent, coming down from a 12-month closing high the previous
day.
In Seoul, the Korea Composite Stock Price Index <>
shed 1.3 percent, although shares in LCD maker LG Display
<034220.KS> rose on expectations of a glass shortage after an
earthquake in Japan on Tuesday disrupted production.
In Australia, stocks <> were steady, supported by a
rise in Commonwealth Bank of Australia Ltd <CBA.AX> which
gained as investors took an optimistic view of its earnings
results and outlook, even though the bank itself gave a
cautious view. [].
Wall Street fell after a prominent banking analyst warned
the sector's fundamentals had yet to improve and the drop in
wholesale inventories raised worries about recovery. []
U.S. wholesalers cut their inventories of unsold goods for
the 10th month in a row in July. []
Output per worker rose at its fastest pace in six years in
the second quarter as businesses wrung more productivity from
fewer staff, suggesting any significant recovery in the U.S.
jobs market is some way off.
The benchmark Standard & Poor's 500 index <.SPX> fell 1.27
percent and the Dow Jones Industrial Average <> shed 1.03
percent.
U.S. crude futures inched up towards $70 a barrel <CLc1>
following a surprise crude stock drawdown in weekly inventory
data from the industry group American Petroleum Institute.
[]
The yen rose against the dollar, extending gains of the
previous day as investors liquidated yen short positions ahead
of the Fed on the view that the Japanese currency's slide after
last week's U.S. jobs data had run its course for now.
The dollar slipped 0.4 percent to 95.65 yen <JPY=> and the
Australian dollar dropped 0.6 percent to 79.04 yen <AUDJPY=R>.
The euro was steady at $1.4150 <EUR=>.
U.S. Treasury debt prices held steady after rising in the
previous session, with the market waiting to see if the Fed
signals it will let its Treasury buying programme expire and
pausing ahead of a 10-year note auction later.
(Editing by Kazunori Takada)
