U.S. shares fall despite Fed's hawkish remarks

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HONG KONG, Aug 5 - Asian shares held yesterday on to recent gains in the morning trading of Thursday, despite hawkish remarks by a senior official at the U.S. Federal Reserve that boosted the dollar while weighing on risk appetite and uncertainty about Chinese policy.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.22%, and Japan's Nikkei climbed 0.32%.

This week, MSCI Asian regional benchmark has lost most of the ground lost a week earlier, when a series of Chinese regulatory crackdowns in industries from property to education overshadowed Chinese stocks and depressed the region as a whole.

Chinese equities have been quieter this week, barring sharp swings in tech giant Tencent after state media criticised the gaming industry.

In the short term, the further rebound will continue but uncertainties over policy control will drive long-term investors away from Chinese technology names, said Edison Pun, senior market analyst at Saxo Markets.

Pun also pointed to remarks about the electronic cigarette business in state media Wednesday, which he said may also bring pressure to related stocks.

U.S. stocks closed mostly lower on Wednesday, with the S&P 500 slipping to record highs 0.46% and closing lower as the market continued to break even. The blue-chip Dow slid 0.92%, though the tech heavy Nasdaq eked out small gains with investors there attached greater weight to negative data from the services sector than to positive jobs figures.

The S&P 500 e-minis aged 0.2% in Asian trading.

Markets are looking at the mixed signals from the data and trying to assess what the Fed will do, said Kyle Rodda, an analyst at IG markets. Richard Clarida said the latest moves were driven by an overnight speech by Fed Vice Chair Rodda which took a more hawkish tone.

Clarida, a major architect of the Fed's new policy strategy, said he believed he felt the conditions to raise interest rates could be met by the end of 2022.

These remarks were to help the U.S. dollar and yields.

The benchmark 10-year yield was last at 1.199% high from a U.S. closing of 1.184%, having touched 1.127% - its lowest level since February - earlier in the day.

This helped the dollar, which bought 109.63 yen, compared with a low of 108.71 on Wednesday.

The firmer dollar in turn weighed on gold, with the spot price falling 0.1%.

Brent crude rose 0.37% to $68.4 a barrel, while the U.S. crude gained $70.61 per barrel, regaining ground after three days in a row of declines.

Analysts at CBA said Wednesday's fall was a result of a big increase in U.S. crude oil inventories crystallized the market's conceptual angst about the Delta-variant COVID dragging on fuel demand.

Ether, the second-largest cryptocurrency, dropped 1.75% after improving 8.7% earlier a day ahead of a technical adjustment to its underlying ethereum blockchain, which should happen later today.

Bitcoin fell 1.3%, resting in the vicinity of $40,000 where it has been for the last week.