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Asia: Shares track US retreat while bonds climb

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[WELLINGTON] Asian stocks retreated amid declines among banks and energy shares as crude oil nursed losses and haven assets found support.

Japanese equities fell on their first day of trading this week, tracking losses in the US where the S&P 500 Index dropped from a record high. US crude traded around US$52 a barrel after sinking the most in more than five weeks amid concern over Iraq's compliance with Opec's production cuts.

The yen maintained its rebound as gold rose for the fifth time in six days, while Australian and New Zealand debt paced Monday's Treasury gains. The South Korean won rallied following its worst day since November. Copper rose.

Anxiety over political developments has crept back into markets in the new year, with investors expressing their concern not through bond buying but via the currency market.

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Meanwhile, the Dow Jones Industrial Average has failed to take on the 20,000-point milestone amid anxiety shares rose too far too fast in the wake of Donald Trump's presidential win. China, which has allowed the yuan to strengthen in 2017 amid a struggle to contain capital outflows, releases data on consumer and producer prices Tuesday.

"The mood - certainly on social media and to an extent on trading floors - suggests bearish sentiment is on the rise, even though US equity markets have really only fallen modestly and there hasn't been any one piece of news that's been catching attention," said Chris Weston, chief markets strategist in Melbourne at IG Ltd.

Stocks

The Topix index fell 0.1 per cent as of 9:21am Tokyo time, as more than twice as many stocks declined as rose on the US dollar-denominated MSCI Asia Pacific Index.

Australia's S&P/ASX 200 Index dropped 0.7 per cent as financial and energy shares slipped by at least one per cent, while the Kospi index in Seoul lost 0.2 per cent.

Contracts on indexes in mainland China and Hong Kong dropped at least 0.1 per cent in recent trade. The S&P 500 fell 0.4 per cent Monday after closing Friday at an all-time high, capping a 6.4 per cent advance since Mr Trump's election.

The Dow Average slipped by 76 points to 19,887.38. It's been stuck in a 250-point range for the past month.  Currencies The yen edged up another 0.1 per cent to 115.89 per US dollar after rallying 0.8 per cent on Monday.

The won strengthened 0.7 per cent and the Thai baht gained 0.3 per cent.

The pound touched its lowest level since Oct 28 Monday after UK Prime Minister Theresa May said over the weekend that negotiations on Brexit will be about "getting the right relationship, not about keeping bits of membership." 

A so-called hard Brexit may push the Bank of England to keep rates lower for longer, while weakening the pound and supporting foreign-focused companies in the main stock index.

The Bloomberg Dollar Spot Index dropped 0.1 per cent, leaving it down one per cent since touching a 14-year high on Jan 3.

Commodities

West Texas Intermediate crude was little changed at US$52.03 a barrel after sinking 3.8 per cent last session as an increase in US drilling offset signs that Opec members are sticking to planned output cuts.

Gold was up 0.1 per cent in the spot market to US$1,182.67 an ounce with demand forecast to rise ahead of Chinese New Year. It gained 0.7 per cent on Monday. Copper futures rose 0.2 per cent in New York ahead of the Chinese prices data.

Bonds

Australian government bonds climbed for the third time in four sessions, with yields down six basis points, or 0.06 percentage point, to 2.71 per cent. Similar maturity New Zealand debt yielded 3.21 per cent, down six basis points as well.

In Japan, 10-year yields were little changed at 0.057 per cent.

Yields on Treasury notes fell five basis points to 2.37 per cent Monday, and were steady as Tuesday trading got under way.

BLOOMBERG

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