Global shares down; fears of cooling measures hit China

SINGAPORE (Reuters) - Global stocks fell on Tuesday, with Japan retreating on a surprise drop in machinery orders amid nagging worries over the U.S. economy, while Chinese shares sank on fears regulators would move to cool the heated market.

London stocks initially opened lower to extend Monday's losses, but by 0728 GMT Britain's FTSE 100 .FTSE index was up 0.23 percent. Germany .GDAXI was little changed and France's main index .FCHI was marginally lower.

The yen matched a three-month low against the dollar on the weak machinery orders, a barometer of corporate capital spending, which underscored expectations the Bank of Japan will raise interest rates only gradually.

Copper extended its fall in Asia, with Shanghai copper down

by its 4 percent daily limit, after a 3 percent decline in London. Gold rebounded after sliding on Monday.

China's main stock index .SSEC slid 3.6 percent as institutional investors dumped shares on mounting worries that regulators would take measures to cool a market that has more than tripled since the start of 2006.

The China Securities Regulatory Commission warned over the weekend stock market had become more risky as valuations jumped. But the market defied those warnings on Monday to hit an intraday record high.

"Now institutions are worrying about possible concrete steps to cool the market, and we expect they will happen," said Zheng Weigang, senior stock analyst at Shanghai Securities.

Japan's Nikkei average .N225 lost nearly 1 percent, with industrial robot maker Fanuc Ltd. (6954.T) retreating a similar amount, while the broad TOPIX index fell 1.1 percent.

Japan's core private-sector machinery orders fell 4.5 percent in March, against forecasts for a 1.3 percent rise, data showed. ID:nT303786

"Machinery data, especially a negative forecast for April-June, dampened market sentiment," said Yasuo Yabe, director of sales at Meiwa Securities.

"Market participants had braced for a scenario that the Japanese economy will soon come out of stagnation and regain strength. But today's data made them question it," he said.

The data showed manufacturers expect core machinery orders to fall 11.8 percent in April-June on the previous quarter. Japan reports first-quarter gross domestic product figures later this week.

The auto sector offered some relief. News that Germany's DaimlerChrysler DCXGn.DE had found a buyer for its Chrysler unit raised hopes for industry consolidation and supported shares such as Toyota Motor Co. Ltd. (7203.T).

South Korean auto makers such as Hyundai Motor (005380.KS) rose 0.62 percent on the Chrysler news, even though Korean firms were unlikely to be involved in consolidation.

This was not enough to stop Seoul shares from sliding over 1 percent, the deepest in a month, as fears a record-setting rally had come too quickly led investors to take profit in outperformers such as Hyundai Heavy Industries (009540.KS).

WORRIES OVER ECONOMY

Mining giant BHP Billiton (BHP.AX) fell 2 percent and Rio Tinto (RIO.AX) shed 1.2 percent after copper and nickel prices fell sharply on Monday, pushing Australia's key index .AXJO down almost 1 percent.

Hong Kong stocks .HSI eased 0.5 percent after climbing to a new record earlier, boosted by Beijing's move to allow banks to invest their client's funds in overseas stocks.

MSCI's gauge of Asia Pacific stocks excluding Japan .MSCIAPJ was down 0.8 percent after hitting a record high on Monday. Singapore .STI and Taiwan stocks also fell.

The broader U.S. market fell on Monday as fears about the health of the world's biggest economy resurfaced.

A survey by the Philadelphia Federal Reserve showed forecasters had cut estimates for second-quarter economic growth, while core inflation and unemployment are likely to hold steady this year. ID:nN14293043

The Standard & Poor's 500 Index .SPX fell 0.18 percent and the tech-laden Nasdaq .IXIC was down 0.62 percent. But the blue-chip Dow Jones average .DJI edged up 0.15 percent, as the Chrysler news boosted automotive shares.

The dollar rose to as high as 120.54 yen JPY= in Asia -- matching a level hit last week that was the highest since February 27 -- before easing to around 120.20 yen. The euro was steady at $1.3549 EUR=.

U.S. Treasuries steadied in Asia, ahead of U.S. consumer price inflation data due at 1230 GMT, that could offer hints on the outlook for Federal Reserve interest rate policy. The Fed has maintained that inflation remains a greater risk than a slowdown in economic growth.

Investors believe persistent benign inflation data could ease the Fed's inflation fears and give the central bank room to consider cutting rates to stimulate growth.

Oil extended gains on concerns about supply disruptions. But forecasts of higher U.S. oil stockpiles are limiting gains, with London Brent LCOc1 up 8 cents to $66.91 a barrel, while U.S. crude CLc1 rose 14 cents to $62.60.

Spot gold XAU= rose to $667.70/668.20 an ounce from $668.20/669.70 late in the U.S. market.