TOKYO (Reuters): Asian shares wobbled near one-week lows on Monday as investors turned cautious ahead of a closely-watched Federal Reserve meeting, while political tensions in the Middle East and Hong Kong kept risk appetite in check.

European stock were expected to open higher, with futures for Britain’s FTSE climbing 0.4% and Germany’s DAX up about 0.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed by early afternoon, after opening slightly weaker. Japan’s Nikkei average also closed flat.

Asian markets got a quick boost after Hong Kong’s Hang Seng Index 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 traded within a tight range, with benchmark Shanghai Composite up 0.2% and the blue-chip CSI 300 rising 0.1%.

US 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 US-China trade worries.

Investors were waiting for more clues from the Fed after policymakers raised expectations for a rate cut in recent weeks amid worries about mounting fallout from the US-Sino trade war.

Strong US retail sales data on Friday rolled back expectations of a Fed rate cut at this week’s meeting to 17.5%, from 31% shortly before the release of the data on Friday, according to CME Group’s FedWatch tool. But bets of an easing by the July meeting remain high at 84%.

“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 US-China trade frictions will also be watched closely, Chandler said.

Financial markets were sideswiped by a sudden escalation in Sino-US 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 US Treasury yields higher, flattening the yield curve.

Benchmark 10-year notes was last at 2.106%, while two-year bond yield edged up, shrinking the spread between two- and 10-year yields to 23.7 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 climbed to 97.583 on Friday, its highest level in almost two weeks, after the US retail sales data eased fears that the world’s largest economy is slowing sharply.

The index last stood at 97.510, while the euro fetched $ 1.1216, near the lower end of its weekly trading range.

Oil rises on tensions after Middle East tanker attacks

Gold off 14-month peak on firmer dollar, focus on Fed meeting