GLOBAL MARKETS-Risk shunned as oil extends drop, yen bounces

* Charts indicate further declines in crude to come

* Commodity stocks, currencies also give up gains

* Japanese blue-chips weaken on earnings worries

(Adds quotes, context)

By Ramya Venugopal

SINGAPORE, April 12 (Reuters) – A decline in crude oil
prices on Tuesday from a 32-month high that could extend in the
near term triggered a bout of profit taking in risky assets,
causing investors to sell equities and slash their bets against
the yen and U.S. dollar.

The global rout in commodity prices also hurt demand for the
Australian dollar, which dropped 2 percent against the yen, and
weighed on U.S. stock futures.

The drop in crude was triggered in part by a Goldman Sachs
report, which advised investors to lock-in trading profits
before oil and other commodity markets reverse. [ID:nN11113549].

“Open interest has been building up since the start of the
new quarter in April, reflecting fresh inflows of speculative
money into the oil market,” said an energy analyst at a leading
Japanese trading house who declined to be named.

“The Goldman report put a damper on this flow, at least for
now, given that there was a sense of an overshoot in the
market,” he said.

Brent crude for May (LCOc1: Quote, Profile, Research) fell to a low of $121.97 a
barrel, easing from Monday’s 32-month peak of $127.02. U.S.
crude (CLc1: Quote, Profile, Research) fell to as low as $107.87.

Developments in Libya, where a peace bid collapsed on
Monday, may also provide cues. [ID:nLDE73A2B7]

Brent may fall to as low as $118.67, while U.S. crude may
find support at $106.81, charts indicated.

Commodity shares from Australia to Japan led a broad decline
in Asian equities, after energy and metals prices slid
overnight, while gold and silver, traditionally safe-haven
investments, also gave up gains.

Tokyo’s Nikkei share average ended the day down 1.6
percent, as blue-chip stocks declined on increasing
uncertainties about the earnings outlook after the March 11
earthquake.

“Many people worry that more and more large-cap companies
including big automakers may cut their earnings estimates for
the business year,” said Hideo Arimura, senior fund manager at
Mizuho Asset Management.

The MSCI index of Asia Pacific shares outside Japan
was down 1.8 percent and on course for the
biggest daily decline since the quake in Japan triggered panic
selling in the region on March 15.

Days after that though foreign investors had been key buyers
of Asian shares, pushing the benchmark indexes of major markets
up between 7 percent and 13 percent over the past three weeks.

YEN RECOVERS SHARPLY

The yen gained about 1.0 percent against the dollar,
about 1.3 percent against the euro and more than 1.7
percent against the Australian dollar .

A series of aftershocks haunted Japan, which raised the
severity of its nuclear crisis to the highest level, putting it
on par with Chernobyl. Some traders said that the market was by
now getting numb to the quakes. [ID:nL3E7FB2TZ]

The U.S. dollar fell to 83.80 yen per dollar , off a
seven-month low of 85.54 set on Thursday. The euro slipped to
120.58 yen , down from Monday’s peak of 123.33.

Spot gold slipped to hit a low of $1,453.31 an ounce
on Tuesday, retreating from a record $1,476.21 an ounce on
Monday, while spot silver traded at $40.12 an ounce,
below a 31-year high at $41.93 struck on Monday.

U.S. 10-year Treasury notes edged higher in Asia on
Tuesday, helped by a pull-back in oil prices and U.S. equity
futures, but near-term gains may be limited if an uptrend in
commodities resumes.

Ten-year U.S. Treasuries yielded 3.558 percent ,
down 4 basis points from late U.S. trade on Monday ,
pulling away from a seven-week high of 3.62 percent hit last
Friday. Ten-year note futures rose 4/32 to 118-18.5/32 (TYv1: Quote, Profile, Research).

(Additional reporting by Chikako Mogi, Risa Maeda, Antoni
Slodkowski in TOKYO, and Reuters FX Analyst Rick Lloyd, Editing
by Kevin Plumberg)

GLOBAL MARKETS-Risk shunned as oil extends drop, yen bounces