By Wayne Cole
SYDNEY (Reuters) - The U.S. dollar took a breather on Tuesday as global bonds steadied from their recent rout, while equities flatlined as political risk resurfaced in Europe ahead of a referendum in Italy this weekend.
Oil prices remained jittery in the countdown to Wednesday's OPEC meeting, but there was no stopping the bull run in industrial commodities with everything from zinc to iron ore benefiting from Chinese demand.
Patchy early Asian trade saw Australian shares dip 0.1 percent (.AXJO) while Nikkei futures (NKc1) pointed to a subdued start for Japanese stocks.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> barely budged after a couple of days of gains.
The cautious mood was set by Wall Street which suffered its worst performance in nearly a month as some investors booked profits in the financial and consumer discretionary sectors.
The Dow (.DJI) had ended Monday down 0.28 percent, while the S&P 500 (.SPX) lost 0.53 percent and the Nasdaq (.IXIC) 0.56 percent. The pan-European FTSEurofirst 300 index (.FTEU3) fell 0.85 percent, led by a near-4 percent drop in Italian banks.
Worries about Italy's banking system are building ahead of a Dec. 4 referendum on constitutional reform, which could decide the political future of Prime Minister Matteo Renzi.
"Citi's base case is for a NO vote to prevail with political uncertainties likely to remain elevated over the near-term," wrote analysts at Citi.
"It's worth watching whether PM Renzi resigns in the event of a No vote as promised, before rushing into euro shorts."
RED HOT METAL
The political risk kept the euro restrained despite the pullback in the dollar. The common currency (EUR=) was stuck at $1.0614, after failing to hold an 11-day high of $1.0686.
Citi sees major chart support at $1.0458-1.0523, a region also capturing the post-U.S. election low of $1.0518.
Profit-taking had pulled the dollar down to 111.81 yen (JPY=), but it remains 6.7 percent higher for the month.
The story was the same against a basket of currencies, with the dollar fading a little from 14-year peaks to stand at 101.14 (.DXY).
The greenback was still on track for its strongest two-month gain since early 2015, underpinned by expectations the Federal Reserve is almost certain to hike interest rates next month.
Yields on two-year Treasury paper (US2YT=RR) have already hit their highest since early 2010 in anticipation, greatly fattening its premium over European and Japanese debt.
In commodity markets, investors anxiously awaited an OPEC meeting on Wednesday with none any wiser on whether producers will agree to lasting output cuts. [O/R]
U.S. crude (CLc1) was last off 26 cents at $46.83 a barrel, after seesawing wildly on Monday. Brent (LCOc1) had finished 85 cents firmer at $48.09.
Industrial metals extended their blistering rally, generating a welcome inflationary pulse in the global economy.
Iron ore futures traded in China surged to their highest since early 2014 (DCIOcv1), while zinc touched a nine‑year peak and lead a five-year top. [MET/L]
Closures of steel plants in China have tightened supply while Beijing has approved a string of massive infrastructure projects, including a $36 billion railway plan just this week.
(Reporting by Wayne Cole; Editing by Eric Meijer)