GLOBAL MARKETS-Asian shares edge up, trade, geopolitical tensions cap gains; focus on Fed meeting

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Dollar index holds near 2-week high after solid U.S.
retail data
* Investors await upcoming FOMC: BOJ, BOE also meet this
week
* Bitcoin jumps to 13 month high

By Tomo Uetake
TOKYO, June 17 (Reuters) - Asian stocks inched higher on
Monday, with a rebound in the Hong Kong market helping the mood,
as investors remained cautious ahead of a closely-watched
Federal Reserve meeting.
But the simmering trade dispute between the United States
and China as well as political tensions in the Middle East kept
risk-appetite in check.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS edged up 0.1%, after opening slightly weaker.
Japan's Nikkei average .N225 ticked up by a similar amount.
Asian markets got a quick boost after Hong Kong's Hang Seng
Index .HSI jumped as much as 1.4%. At the weekend, the
territory's leader Carrie Lam climbed down on a bill that would
have allowed extradition to China.
The Hang Seng fell for three sessions in a row through
Friday, after the extradition bill triggered mass protests and
some of the worst unrest seen in the territory since Britain
handed it back to Chinese rule in 1997. "Last week the issue looked as if it would become another
thorny point between the United States and China. As the bill is
now being postponed indefinitely, things will likely calm down,
which is good for markets," said Hiroyuki Ueno, senior
strategist at Sumitomo Mitsui Trust Asset Management.
Mainland Chinese shares also firmed, with the benchmark
Shanghai Composite .SSEC up 0.2% and the blue-chip CSI 300
.CSI300 rising 0.2%.
U.S. Secretary of State Mike Pompeo told Fox News on Sunday
that President Donald Trump would raise the issue of Hong Kong's
human rights with China's President Xi Jinping at a potential
meeting of the two leaders at the G20 summit in Japan later this
month. Wall Street stocks ended lower on Friday as investors turned
cautious before this week's Fed meeting, while a warning from
Broadcom on slowing demand weighed on chipmakers and added to
U.S.-China trade worries. .N
Investors are waiting for more clues from the Fed after
policymakers raised expectations for a rate cut in recent
weeks. Strong U.S. retail sales data on Friday rolled back
expectations of a Fed rate cut at this week's meeting to 21.7%,
from 28.3% on Thursday, according to CME Group's FedWatch tool.
But bets of an easing at the July meeting remain high at
85%.
"The week ahead is likely to provide some clarification for
investors on three fronts that have been a source of
uncertainty. The FOMC meeting, with updated forecasts, is centre
stage," said Marc Chandler, chief market strategist at
Bannockburn Global Forex.
A private gauge on eurozone's manufacturing sector as well
as U.S.-China trade frictions will also be watched closely,
Chandler said.
Financial markets were sideswiped by a sudden escalation in
Sino-U.S. trade tensions in early May, with growing anxiety
among investors that a protracted standoff could tip the global
economy into recession. Geopolitical tensions in the Middle East added another layer
of uncertainty after the United States blamed Iran for attacks
on two oil tankers in the Gulf of Oman last week. Hopes that global central banks will keep the money spigots
open have helped to temper some of the fears, and all eyes are
on the Fed's two-day meeting starting on Tuesday.
The Bank of Japan also meets this week and is widely
expected to reinforce its commitment to retain a massive
stimulus program for some time to come.
The retail sales report also sent short-dated U.S. Treasury
yields higher, flattening the yield curve. L2N23L10H
Benchmark 10-year notes US10YT=RR was last at 2.091%,
while two-year bond yield US2US10=TWEB edged up, shrinking the
spread between two- and 10-year yields to 23.6 basis points
compared to more than 30 earlier this month.
A Reuters poll showed a growing number of economists expect
the Fed policymakers to cut interest rates this year, although
the majority still see it holding steady. In currency markets, the dollar index against a basket of
six major currencies .DXY climbed to 97.583 on Friday, its
highest level in almost two weeks, after the U.S. retail sales
data eased fears that the world's largest economy is slowing
sharply. The index last stood at 97.488, while the euro EUR=
fetched $1.1222, near the lower end of its weekly trading range.
Oil prices rose on Monday after U.S. Secretary of State
Pompeo said Washington will take all actions necessary to
guarantee safe navigation in the Middle East, as tensions
mounted following attacks on tankers last week. O/R
Brent futures LCOc1 rose 0.4% to $62.24 a barrel, while
U.S. West Texas Intermediate (WTI) crude futures CLc1 gained
0.3% to $52.66.
Spot gold XAU= was little changed at $1,341.48 an ounce
after hitting a 14-month peak on Friday.
Bitcoin BTC=BTSP jumped overnight to $9,391.85, its
highest level in 13 months. It was last quoted at $9,104.64.