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Oil traded near seven-week lows on Tuesday as a softening demand outlook weighed on commodities, while bond, currency and stock markets traded cautiously ahead of central bank meetings in the U.S. and Japan and a slew of major corporate earnings reports.

Brent crude futures hit $79.36 overnight as traders focused on worries over Chinese demand rather than tensions in the Middle East or Venezuela and turned sellers. [O/R]

The S&P 500 steadied after a two-week downturn and futures ticked 0.4% lower early in the Asia session with the focus on two-day policy meetings in Washington and Tokyo that wrap up with interest rate decisions on Wednesday.

Japan's Nikkei, which dropped nearly 6% last week, was 0.7% lower in morning trade. MSCI's broadest index of Asia-Pacific shares outside Japan also fell 0.7%.

Markets are pricing almost no chance of a U.S. rate cut this week but have fully priced a 25 basis-point reduction in the Fed Funds rate for September and so expect policymakers to sound dovish.

In Japan a broader range of outcomes is on the table, with markets pricing a near 60% chance of a 10 basis point rate hike and expecting to hear about how the Bank of Japan plans to edge its way out of an enormous bond-buying programme.

"The term 'calm before the storm' has been heard across the floors," said Chris Weston, head of research at Pepperstone in Melbourne. "This is a day for position management and to review broad exposures."

The dollar and yen were kept in fairly compact ranges and took a breather after recent breakout moves.

The euro bought $1.0851 and gentle pressure remained on the Australia dollar which has been dragged lower by falling commodity prices. The Aussie, which bought nearly $0.68 less than three weeks ago, traded at $0.6536.

The yen, which has rebounded sharply from a 38-year low of 161.96 per dollar hit early in July, hovered at 153.95 per dollar.

"We are at an interesting intersection for yen here," said Nathan Swami, head of currency trading at Citi in Singapore, with this week's central bank meetings possibly sketching a shift in the rates outlook and the yen's trajectory.

"It is too early to tell if the factors driving yen weakness have changed permanently. For now, this seems more like a short-term correction to the USD/JPY higher trend, but we feel there is downside risk that needs to be priced into a trade."

Later in the day Microsoft and chipmaker AMD report earnings after the bell in New York and preliminary CPI data is due in Germany and Spain.

Australian inflation data will also be released on Wednesday and the Bank of England is priced for a roughly even chance of a rate cut at its policy meeting on Thursday.