Asian shares slipped along with commodities on Tuesday in a reversal of the previous day's solid gains, with many investors sticking to the sidelines and awaiting more clues on whether the economic recovery is picking up steam.

The Shanghai Composite index <.SSEC> slid 3.4 percent as cautious remarks from Chinese Premier Wen Jiabao the previous day stirred worries about the recovery, but the drop had limited fallout on other markets.

Investors showed little reaction to the White House saying that Federal Reserve Chairman Ben Bernanke would be reappointed for another term at the helm of the central bank.

Analysts said that the decision removed uncertainty about the outlook for U.S. monetary policy and was neutral for U.S. assets.

Some analysts had said a decision not to reappoint Bernanke would have been a negative by risking politicizing the Fed chief post at a time when investors fret about record U.S. deficits.

When you look at responses to last year's financial crisis, bold action was taken and the market reacted to that favorably, said Takahide Nagasaki, chief FX strategist at Daiwa Securities SMBC in Tokyo.

I don't think there will be any major impact, but it should be positive for stock and bond markets in the sense that an element of uncertainty has been removed.

The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped 1 percent, with the consumer discretionary and health care stocks the bigger decliners. The index is still up about 47 percent for the year and near an 11-month high struck earlier in the month.

Share trading volumes were very light for a second day running, leading to exaggerated moves across markets.

Japan's Nikkei average <.N225> shed 0.8 percent after jumping 3.4 percent the previous day, its biggest one-day gain in 3- months.

Foreign investors, which have been increasingly shoving funds back into Japanese shares in the past few weeks, are keeping an eye on Japan's August 30 general election.

Many are expecting a victory by the opposition Democratic Party but remain hesitant about taking big positions before the see the results.

The dollar dipped against the yen and was down slightly against a basket of currencies, with the yen rebounding after a broad slide the previous day as market players favored riskier assets including higher-yielding currencies.

The dollar shed 0.6 percent to 93.90 yen. The Australian dollar, the highest-yielding of major currencies, dipped 0.2 percent to $0.8354 and dropped nearly 1 percent to 78.45 yen.

Gold prices gained on the dollar's woes, rising $4.45 an ounce to $945.85. But oil prices pulled back, losing 58 cents a barrel to $73.79 after reaching a 10-month high of $74.81 on Monday.

Safe-haven government bonds popped higher on the retreat in shares and gains in U.S. Treasuries the previous day. September Japanese government bond futures edged up 0.17 point to 139.08 and the benchmark 10-year JGB yield dipped half a basis point to 1.320 percent, back near a five-week low struck last week.

(Editing by Jan Dahinten)

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