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[SYDNEY] Uncertainty gripped Asian markets on Tuesday as investors braced for a potentially pivotal US presidential debate by shunning stocks while favouring safe haven bonds and the yen.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 per cent in early trade, while South Korea fell 0.6 per cent.
Japan's Nikkei dropped 1 per cent as a higher yen threatened exporter sales and profits.
The debate between Democrat Hillary Clinton and Republican Donald Trump starts at 0100 GMT and could have a big impact with the race seemingly so close.
Markets have tended to see Mrs Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for US foreign policy, trade and the domestic economy.
On Wall Street, the Dow fell 0.91 per cent, while the S&P 500 lost 0.86 per cent and the Nasdaq 0.91 per cent. The pan-European Stoxx 600 index also fell 1.6 per cent to a one-week low.
Big banks led the declines after Deutsche Bank slid to a record low on concerns it might need to raise more capital to meet US$14 billion in US fines.
"There's a thing called Trump thermometer," said David Bloom, London-based global head of forex strategy at HSBC. "If you want to know who won the presidential election, don't go to Twitter or Facebook. Just look at the US dollar/Mexico peso."
The peso has hit record lows in recent days on concerns a Trump victory would threaten Mexico's exports to the United States, its single biggest market.
"If Clinton wins, you will get a big rally in the peso, and reasonable rallies in emerging markets," he said, while if Trump gets the nod it should benefit safe-havens such as the yen, the euro and the Swiss franc.
The US dollar was already down at 100.34 yen and threatening a psychological bulwark at 100.00. The euro was firm at US$1.1252.
Other safe havens include US Treasuries which caught a bid ahead of the debate and pushed longer-term yields to three-week lows.
In commodity markets, oil steadied after bouncing 3 per cent on Monday as the world's largest producers gathered in Algeria to discuss ways to tackle a crude glut that has battered prices for two years now.
Brent crude eased back 29 US cents to US$47.06 a barrel, while US crude dipped 27 US cents to US$45.66 per barrel.