GLOBAL MARKETS: Buoyant stocks pause for breath; yen gallops higher

Bonds gained and a rebound in stock markets slowed down on Wednesday after softer-than-expected U.S. retail sales figures, while a rally in the yen has extended and might be beginning to signal a shift in investor thinking since Japan's election.

U.S. jobs figures are due later in the day and the chance of downward revisions to recent numbers have pressured the dollar.

Trade in Asia was lightened by a holiday in Japan, but a third straight session of gains for the yen JPY= had it at 153.3 per dollar and set traders talking about whether it was catching a boost from Tokyo or riding high on dollar softness.

It is up about 2.5% on the dollar since Prime Minister Sanae Takaichi won a sweeping victory in Sunday's election, confounding some expectations that concern about her stimulus plans would keep pressure on the currency and on bonds.

"To be long yen, you need to believe that the correlation to Nikkei will break and it becomes an unhedged 'buy Japan' trade," said Brent Donnelly, a currency trader and founder of analytics firm Spectra Markets.

"That's possible. I just think the jury's still out."

Typically, the yen falls when the stock market rises, and in recent sessions Japan's stock market has soared to record peaks in anticipation of government support for consumers.

Nikkei futures JNMcm1 rose on Wednesday, though the cash market was shut for a holiday.

Gold XAU= rose back above $5,000 an ounce and Treasury futures TNc1 climbed a little, with the cash market closed.

Benchmark 10-year U.S. Treasury yields US10YT=TWEB fell nearly six basis points on Tuesday and touched a one-month low of 4.14% after data showed a 0.1% dip in core U.S. retail sales in December and downward revisions to November and October figures. Yields fall when bond prices rise.

The S&P 500 .SPX closed 0.3% lower, as a recovery from last week's heavy selling in software shares starts to lose momentum. S&P 500 futures ESc1 were up 0.3%, European futures STXEc1 were flat and FTSE futures FFIc1 rose 0.3%.

CBA LEAPS, CSL SINKS ON AUSSIE EARNINGS

Elsewhere in Asia, consumer stocks fell in China and bonds rallied after softer-than-expected inflation highlighted weakness.

Hong Kong shares .HSI edged 1% higher and Taiwanese chipmaker TSMC 2330.TW helped Taiwan stocks .TWII to a record.

Earnings drove moves in the Australian market .AXJO, which rose nearly 1.7%.

Commonwealth Bank of AustraliaCBA.AX shares jumped 6.8% as Australia's top mortgage lender posted record earnings, loan growth, held market share and lifted its dividend.

Shares in CSL, a biotech company that makes most of its money selling blood plasma treatments for rare illnesses, dived 11% and touched eight-year lows after the company reported a fall in first-half profit and, late on Tuesday, announced the departure of its CEO.

The euro EUR=topped $1.19 while the Aussie AUD= scaled a three-year peak as the central bank's deputy governor said inflation was too high, reinforcing investor speculation that further policy tightening might be needed.

China's yuan CNY=CFXS was steady near its highest in almost three years, bolstered by corporate demand for cash ahead of the Lunar New Year break. CNY/

Brent crude oil futures LCOc1 steadied at $69.18 a barrel with markets hanging on U.S.-Iran diplomacy.

Bitcoin BTC= has struggled to progress beyond the $70,000 barrier and was pinned around $67,400 on Wednesday.

-Tom Westbrook/Reuters