Stocks in Asia slipped on Wednesday as investors awaited the U.S. Federal Reserve's announcement of its decision on interest rates. Meanwhile, markets in Hong Kong closed early as the city braces itself for a tropical storm. The Nikkei 225 in Japan slipped 0.86% to close at 21,521.53, with shares of index heavyweight Fast Retailing declining 1.96%. The Topix index also fell 0.66% to end its trading day at 1,565.14. Shares of Sony surged 5.31% after the company posted a record first-quarter profit on Tuesday. Mainland Chinese stocks slipped on the day, with the Shanghai composite shedding 0.67% to 2,932.51 and the Shenzhen component falling 0.77% to 9,326.61. The Shenzhen composite also declined 0.681% to 1,571.30. In Hong Kong, the Hang Seng index closed early for the day as a tropical cyclone signal was raised to its third highest level. The index fell 1.31% to 27,777.75 as shares of life insurer AIA fell 2%.

China's factory activity slumps again

China's factory activity contracted for the third straight month in July, according to official data released earlier on Wednesday. The official manufacturing Purchasing Managers' Index (PMI) for July came in at 49.7, according to data from the Chinese statistics bureau. Economists polled by Reuters had expected factory activity in China to edge up to 49.6 from June's reading of 49.4. A PMI reading above 50 indicates expansion, while those below that signal contraction.

US-China trade, Fed rate decision in focus

U.S. President Donald Trump said in a series of tweets Tuesday that China is not keeping its promise of buying more U.S. agricultural products. For its part, China insists that it has bought U.S. agricultural products. Trump's comments come as U.S.-China trade talks are happening in Shanghai from July 30 and 31, as the two economic powerhouses aim to reach a deal to end a protracted trade war. Meanwhile, the Fed is set to deliver its decision on interest rates later Wednesday stateside, with expectations that it will cut interest rates by a quarter point. Investors will also look for clues from Powell about potential rate cuts later this year. Currently, traders are pricing in at least two rate cuts of 25 basis points before the end of the year, according to the CME Group's FedWatch tool. "The Fed has given us zero reason to expect anything except a quarter point rate cut so the change in interest rates will be the least market moving part of the (Federal Open Market Committee) announcement," Kathy Lien, managing director of foreign exchange strategy, wrote in a note. "Instead, US dollar traders should be focused on the votes and forward guidance," Lien said.

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