Asia markets firmer but China stocks slide

HONG KONG, June 4 (Reuters) Asian stock markets rose on Monday with Australia and Singapore following Wall Street's lead to record highs, but a slump in mainland Chinese shares saw many regional markets lose grip of early peaks.

European stocks were expected to open cautiously with London's FTSE 100 index <.ftse> seen down 4 to 6 points, according to financial bookmakers.

The dollar held near a four-month high against the yen after robust U.S. jobs and manufacturing data lowered U.S. rate cut expectations, while strength in stocks weighed on Japanese government bonds, driving the 10-year yield to seven-month highs.

London Brent crude wallowed below $69 a barrel after a major U.S. gasoline pipeline resumed pumping and gold took a breather near $670 an ounce, steadying after retesting a two-week high first reached on Friday.

Chinese stocks slid 8 percent in late trade, extending last week's 4.3 percent fall, as mainland investors continued to fret about the hike in a stock-trading tax -- the latest move by authorities to cool a market that had nearly tripled in value in the past year.

''The volatility on the mainland stock exchanges is keeping investors cautious,'' said Ben Kwong, chief operating officer at KGI Asia in Hong Kong.

''But a 10 to 20 percent correction is still a healthy magnitude.

This is what investors would like to see, because if the market ignores government measures and continue to run ahead, then it may induce further series of measures.'' Traders also said record finishes on Wall Street last Friday driven by robust U.S. economic data had helped to cushion worries about China.

''The news flow has been overwhelmingly positive. The only area of concern is China,'' said Sydney-based Craig James, chief equities economist at Commonwealth Securities.

Tokyo's Nikkei average <.n225> ended 0.1 percent higher after earlier reaching a fresh three-month high, underpinned by data showing capital spending by Japanese firms rose to a record in the first three months of 2007.

Construction machinery maker Komatsu climbed 4.3 percent and top auto maker, Toyota Motor , gained 1.2 percent, boosted also by its strong U.S. sales in May.

In Hong Kong, Giordano International surged nearly 10 percent on speculation that three global giants were considering buying a stake in the fashion retailer.

Among the major markets, Australia's S&P/ASX 200 index <.axjo> hit a record high thanks to strength in the major miners including BHP Billiton , while markets in Singapore <.sti> and the Philippines <.psi> also scaled new peaks.

South Korea's KOSPI <.ks11> posted a record-closing high, while Thailand stocks <.seti> rose over 1 percent to one-year highs after the economy grew by a stronger-than-expected 1.2 percent in the first quarter.

The MSCI index of Asian stocks outside Japan <.msciapj> climbed 1.1 percent to 454.92 by 0633 GMT, after touching a peak of 455.40.

YIELDS RISE Weakness in U.S. Treasuries and gains in the Nikkei took a toll on Japanese government bonds (JGBs), pushing the 10-year JBG yield up 2.5 basis points to a seven-month high of 1.8 percent, the highest since late October. The 10-year yield settled at 1.795 percent.

''It's like getting a triple punch. The market reacted to strong U.S. economic data on Friday as well as strong capital figures this morning, in addition to last week's strong employment figure in Japan,'' said Eiji Dohke, a strategist at UBS.

In the currency market, the dollar was near an eight-week high against the euro while the yen was within easy reach of a 4-{ year low against the dollar.

The euro was buying $1.3450, little changed from late New York levels last Friday.

Against the yen, the dollar was near a four-month high of 122.14 yen set on Friday, after recovering from a 0.1 percent slip to 121.90 yen. The next level of 122.20 yen is a 4-{ year high struck in January.

''We saw some yen buying on risk-reduction trades, but such trades are unlikely to continue. The market remains fixated on rate differentials, which means the yen is likely to fall further,'' said a forex trader at a Japanese bank.

The market focus was expected to shift to a series of central bank policy meetings later this week including those in Europe, Britain, Australia and New Zealand.

REUTERS SBA SSC1356