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THE bulls appear to be taking a breather for now, as stocks in both the United States and Asia surrendered their gains, snapping a run of strong gains seen in the past week.
Not surprisingly, risky currencies also retreated against the greenback even though the Singapore dollar surprisingly edged higher against its major counterparts.
Against the greenback, the Sing dollar edged higher during the early sessions, rising to $1.4413 but fell slightly to $1.4419 by evening.
The Singapore unit edged higher against the euro, climbing to $2.0585 against the euro, compared with $2.0604 a day earlier. Gains were also seen in the Singdollar-Sterling pair.
Elsewhere, risk aversion was the order of the day and regional currencies retreated against the greenback. For example, the Australian dollar dipped 0.2 per cent to US$0.8354 and dropped nearly 1 per cent to 78.45 Japanese yen.
Asian stocks mostly closed flat yesterday, after Wall Street ended largely unchanged, as traders sold down on US stocks on economic concerns again.
US counters such as Citigroup, AIG and Fannie Mae initially charged higher, but a sharp gain in US Treasury debt prices, which drove benchmark yields lower, triggered a sell-off in those stocks.
In Asia, it was a mixed picture where some markets gained while others lost. For example, mainland stocks fell for a fourth day, the Shanghai Composite Index's longest losing streak this year. There, the worry appears to be that slowing loan growth will eat into margins and curb housing and power demand, said OCBC economist Enrico Tanuwidjaja.
In contrast, the Straits Times Index gained 0.25 per cent.
Investors showed little reaction to the White House saying that Federal Reserve chairman Ben Bernanke would be reappointed for another term at the helm of the central bank.
Analysts said that the decision removed uncertainty about the outlook for US monetary policy and was neutral for US assets.
Some analysts said that a decision not to reappoint Mr Bernanke would have been negative as it risks politicising the Fed chief post at a time when investors fret about record US deficits.
In Japan, the Nikkei 225 shed 0.79 per cent after jumping 3.4 per cent the previous day, its biggest one-day gain in three-months.
Foreign investors, who were busy pouring monies back into Japanese stocks in the past few weeks, are now keeping an eye on Japan's Aug 30 general election.
The greenback dipped against the Japanese yen and was down slightly against a basket of currencies, with the yen rebounding after a broad slide the previous day. The dollar shed 0.6 per cent to 93.9 yen but reached 94.27 later.
Safe-haven government bonds rose higher on the retreat in shares and gains in US Treasuries on Monday.
Treasury debt prices rose, with the 30-year bond gaining almost two full points, as investors did some bargain hunting after Friday's sharp losses and the Federal Reserve bought government debt.
Meanwhile, oil fell below US$74 a barrel yesterday, down for the first time in six days. Gold prices gained on the dollar's woes, rising over US$4.45 an ounce to US$947.3.
Oil and commodities traders will be keeping their eyes on US housing, consumer confidence and retail sales data due later on Tuesday as pointers to the health of the world's biggest economy, following upbeat remarks by Mr Bernanke and a surprising rise in home sales late last week.
Furthermore, reports later showed new industrial orders in the euro zone rebounded in June and US economic activity improved again in July.
Key data and events to watch out for this week in Asia, include the Q2 GDP reports from Thailand, Malaysia and the Philippines, which should provide further indication of less severe contractions, after the sharp declines seen in Q1 2009.
This could be an affirmation of the sequential improvement in data coming out from Singapore and Hong Kong.
The stabilisation in economic contractions and weak consumer prices mean that Bank Negara Malaysia and the Bank of Thailand can keep their respective accommodative monetary policy on hold this week.
Meanwhile, external trade data from Taiwan and Hong Kong are expected to point to continued weakness in external demand, although production data should continue to improve in Taiwan and Singapore, even if it is a mere sign of inventory replenishment, said UOB Treasury Research.
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