Stocks slipped while the Swiss franc rose and gold hit a record high on Monday as hopes for a political deal to avert a U.S. default began to fade, though investors were mostly seeking to protect their portfolios with no signs of panic selling.

Equity markets in Asia were down between 0.6 percent to 1 percent, and U.S. stock futures fell 0.9 percent SPc1, while the benchmark 10-year U.S. Treasury yield rose four basis points to 3 percent.

Investors have been whipsawed in the past few months by hope and disappointment over policymakers' ability to halt sovereign debt crises in the euro zone and the United States.

The focus was squarely on Washington now after European leaders scraped together a second bailout for Greece last week.

Republicans and Democrats in the U.S. Congress were each trying to put together their own plan after talks with President Barack Obama broke down over the weekend, heightening fears of a catastrophic U.S. debt default that could roil the global economy.

Investors still mostly viewed the headlines coming out of Washington as political theatre and expected an eleventh-hour solution before an Aug. 2 deadline when the U.S. Treasury said it would not be able to borrow any more funds.

"Despite the ever-frustrating horse-wrangling between the Democrats and Republicans, which could result in a downgrade of the U.S. government debt ranking, I still believe that some kind of temporary deal will be struck in the last minute," said Khiem Do, head of Asian Multi-Asset with Baring Asset Management in Hong Kong.

"Overall, we remain positive on the solid economic and investment outlook for Asia, which may actually be considered as the 'safe haven' while the debt concerns and consumer de-leveraging in Japan, Europe and the U.S. continue," Do said.

Japan's Nikkei share average fell 0.6 percent , led by shares of clothing chain company Fast Retailing that were down 1.5 percent after hitting a 13-month high last Friday.

The MSCI index of Asia Pacific stocks outside Japan was down 0.5 percent , with industrials and commodity-related stocks underperforming the most.

The Swiss franc was the biggest gainer among the G10 major currencies, owing to its safe haven status.

"The fact that they seem to be jumping from one type of proposal to another and not converging on anything is beginning to worry markets," said Steven Englander, head of G10 FX strategy at Citigroup in New York.

The dollar was down around 0.4 percent from Friday against the franc at 0.8145 and was also down slightly against the yen at 78.40 yen .

Traders were watching U.S. S&P 500 stock futures closely for indications on the broader market's willingness to stick with risky assets as the U.S. debt deadline looms.

Correlations between G10 currencies and the S&P 500 index are strongest with the Canadian dollar, Australian dollar and Swedish crown, suggesting those currencies could be in the firing line if fear causes dealers to liquidate positions in a hurry, Robert Rennie, chief currency strategist with Westpac Bank in Sydney, said.

Treasuries slid in early trading. The 10-year future was down 6.5/32 to 124-4/32 TYc1, though remains not too far from a seven-month high of 125-28/32 reached in June.

In the cash market, selling was heavier in late-dated maturities. The 30-year yield climbed six basis points to 4.32 percent .

In commodities trading, gold rose to an all-time high of $1,622.49 an ounce, and silver was at $40.23, close to last Tuesday's two-month high of $40.84 .

U.S. crude oil for September delivery in New York CLc1 fell more than $1 to just under $99 a barrel, while Brent oil futures LCOc1 were down 67 cents at $118.00.

(Additional reporting by David Gaffen in NEW YORK and Eric Burroughs in HONG KONG; Editing by Kim Coghill)

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