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Asia: Markets kick week off with losses but euro holds gains

[HONG KONG] Asian markets fell on Monday after last week's volatility, but the euro held gains following healthy economic data and on hopes German Chancellor Angela Merkel is close to forming a government.

Investors ignored another strong lead from Wall Street, where the S&P 500 and Nasdaq chalked up fresh records on optimism for strong sales on Black Friday and Cyber Monday - the two major post-Thanksgiving shopping days.

With little to drive buying on Monday profit-takers moved in, with eyes on the release of key data in major economies this week from China to the United States.

In early exchanges Shanghai slipped 0.7 per cent, with dealers then still on edge after Thursday's sharp losses fuelled by concerns about a crackdown on speculative trading.

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Hong Kong lost 0.5 percent, Tokyo gave up 0.3 per cent by the break and Seoul shed 1.3 percent.

Sydney was slightly lower, while Singapore lost 0.2 per cent and Taipei retreated 0.5 per cent.

In currency trading the euro stood firm against the dollar after surging on Friday in reaction to healthy economic data, including a gauge of the German business climate hitting an all-time high in November, despite political uncertainty.

There are also hopes Dr Merkel can hammer out a deal to form a new government for Europe's biggest economy.

The Social Democrats said they were ready to hold talks with the chancellor, who is facing pressure to reach an agreement to end weeks of turmoil.

The euro plunged last week after talks to form a new government with the pro-business Free Democrats (FDP) and the left-leaning Greens broke down, raising the prospect of fresh elections.

Adding to the upbeat euro sentiment was last week's dovish Federal Reserve minutes that have led some traders to lower their expectations for the pace of US interest rate hikes, while the European Central Bank is looking more bullish.

"Too many positive developments to ignore suggests the market will set sights on the US$1.2000 level," Stephen Innes, head of Trading APAC at Oanda, said in a commentary.

"The market continues to underprice the ECB risk, but with the recent string of uproarious EU economic data, surely this will be too difficult for the ECB to ignore and at minimum moderate their lower for longer stance in spite of inflation undershooting expectations."

Oil prices retreated after Friday's gains that saw West Texas Intermediate hit highest level since July 2015 on reports Russia and Opec could agree a deal to extend their production cuts when they meet this week.

"Opec and Russia appear to be in agreement to extend the oil production cut until the end of 2018 but the final details need to be worked out this week," said Margaret Yang Yan, market analyst at CMC Markets Singapore.

In focus this week are the senate hearing for Jerome Powell, Donald Trump's pick as the next Fed boss, while current governor Janet Yellen is also due to speak.