GLOBAL MARKETS-Shares on defensive, China stimulus hopes offer some comfort
* Investors cautious, Ukraine crisis, soft U.S. data blamed
* U.S. short-term bond yields rise on Yellen rate hike comments
* Gold near 5-week low as U.S. short term yields rise
* Emerging market shares resilient, China stimulus hopes support
* European shares seen recouping some of Monday's losses
TOKYO, March 25 (Reuters) - Shares were in a defensive mode on Tuesday on uncertainty over Ukraine and the global economy, though still-vague hopes of stimulus measures from China may be supporting investor sentiment.
Short-dated U.S. Treasuries prices wobbled, taking short-term U.S. bond yields to six-month highs as investors fretted over whether the Federal Reserve would raise interest rates sooner than expected, following comments last week from Janet Yellen, the bank's new chief.
European shares are expected to recoup some of the previous day's heavy losses. Spreadbetters saw Germany's DAX opening 0.4 percent above its close and Britain's FTSE and France's CAC opening up 0.3 percent.
Japan's Nikkei dropped 0.4 percent while MSCI's broadest index of Asia-Pacific shares outside Japan also dipped 0.2 percent.
That followed a lacklustre session on Wall Street, where the Nasdaq Composite Index led the losses with a fall of 1.2 percent to a five-week low as investors took some money off recent top performers such as biotech shares. The S&P500 Index fell 0.5 percent to 1,857.44.
Concerns over Ukraine and soft U.S. manufacturing were cited as possible catalyst, though market players noted the selling could also reflect unwinding of positions ahead of the quarter-end. Markit's U.S. manufacturing survey showed U.S. factories slowed down in March.
The diplomatic standoff over Ukraine continued as U.S. President Barack Obama and major industrialised nations warned Russia on Monday it faces additional economic sanctions if President Vladimir Putin takes further action to destabilise Ukraine.
"In short, there's nowhere to put money at this point. Investors are generally upbeat on the U.S. but they want to see more evidence that the weakness in some of the recent data is due to a bad weather," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
In a world full of uncertainty, short-term U.S. bonds attracted even more attention after Federal Reserve Chair Janet Yellen explicitly said last week the Fed could raise rates around six months after its current bond-buying programme ends.
Money market futures <0#FF:> are pricing in some chance of a rate hike by spring 2015 with a full rate hike to 0.50 percent fully priced in by August next year.
Even as the U.S. 30-year bond yield fell to 3.56 percent , near this year's low of 3.525 percent, short-dated debt yields moved in the opposite direction as investors tried to price in future rate hikes.
The U.S. two-year yield shot to six-month high of 0.4655 percent on Monday and last stood at 0.437 percent. It was around 0.35 percent before Yellen's comments.
Rising U.S. short-term rates were undermining the attraction of precious metals, with gold fetching $1,315.35 per ounce , close to Monday's near five-week low of $1,307.54.
Silver tumbled to a six-week low of $19.84 an ounce on Monday and last stood at $19.98.
While rising U.S. rates are generally seen as negative for emerging markets, many of them have been resilient so far, helped in part by expectations the Chinese government could unveil economic stimulus measures following weak Chinese manufacturing data on Monday.
"The data was pretty bad. It looks almost certain that the first quarter growth is likely to fall short of the government's growth target of 7.5 percent. So the government is likely to take some measures, as it has done a few times in the past year, to support the economy," said Naoki Tashiro, President of T.S. China Research.
Mainland Chinese shares briefly hit a one-month high as companies linked to Shanghai's free trade zone gained after media reports indicated restrictions on foreign investors there could be relaxed.
Analysts said, however, any policy measures adopted by China to support the economy would be modest and certainly not on the scale of its global financial crisis strategy, when a torrent of lending led to an unprecedented build-up of debt.
The Australian dollar, often seen as a liquid proxy for bets on the Chinese economy, also hit a three-month high of $0.9158 before erasing gains.
"The message from Chinese policymakers is clear that even though Q1 growth will be a bit softer, they just won't let (the economy) collapse," said Sean Callow, currency strategist at Westpac in Sydney.
Other major currencies were on hold, with the euro changing hands at $1.3827 and the yen at 102.30 yen to the dollar . (Additional reporting by Cecile Lefort in Sydney, Alice Woodhouse and Natalie Thomas in Hong Kong; Editing by Eric Meijer)