The US 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.

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Oil prices remained jittery in the countdown to Wednesday`s OPEC meeting but industrial commodities continued to benefit mightily from Chinese demand, both real and speculative.

The action in Asian stocks was guarded with Australia up 0.1% and Japan's Nikkei off 0.2%.

MSCI`s broadest index of Asia-Pacific shares outside Japan barely budged after two 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 Jones Industrial Average had ended Monday down 0.28%, while the S&P 500 lost 0.53% and the Nasdaq 0.56%. The pan-European FTSEurofirst 300 index fell 0.85%, led by a near-4% drop in Italian banks.

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Worries about Italy`s banking system are building ahead of a December 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 was pinned at $1.0606, 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-US election low of $1.0518.

The dollar was again moving higher on the yen to reach 112.18 , after profit-taking pulled it down as far as 111.58. It remains 7% higher for the month.

Dealers reported Japanese buying for the new month with orders today settling on December 1. Against a basket of currencies, the dollar held at 101.270 and not far from last week`s 14-year peak.

The greenback was still on track for its strongest two-month gain since early 2015, underpinned by expectations the US Federal Reserve is almost certain to hike interest rates next month.

Yields on two-year Treasury paper 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 Organisation of Petroleum Exporting Countries (OPEC) meeting on Wednesday with none any wiser on whether producers will agree to lasting output cuts. 

US crude was last off 25 cents at $46.83 a barrel, after seesawing wildly on Monday. Brent eased 28 cents to $47.96. Traders fear a major selloff should OPEC fail to reach a deal after so much wrangling.

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 , while zinc touched a nine-year peak and lead a five-year top. 

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.

ALSO READ: Dollar, US bond yields drop as oil tumbles on output cut doubts