Asian shares surrendered early gains on Tuesday, weighed down by Chinese stocks, which slid on reports that Beijing will not relax tougher property measures any time soon.

Major European stocks <.FTEU3>, however, opened slightly higher after Alcoa , the largest U.S. aluminum producer, posted surprisingly strong quarterly results and provided a positive outlook for global consumption of the metal.

The euro steadied after dropping from two-month highs as investors awaited Greece's return to capital markets for the first time since late April and the results of stress tests on euro zone banks next week.

But the tone was weaker in Asia, where the focus for much of the session was on China's volatile stock market.

China's banking regulator left few doubts that efforts to rein in real estate speculation will remain in place despite media reports of easing restrictions in some cities. That helped to trigger some profit taking in Asian stocks after three days of gains.

The view that the Chinese will not ease restrictions on property took away from sentiment some, and markets had been up for a few days, so there's a bit of a correction, Lorraine Tan, director of research, Asia for Standard & Poor's in Singapore, said.

It was a reminder of risks.

The MSCI ex-Japan share index <.MIAPJ0000PUS> fell 0.7 percent by mid-afternoon after an initial move higher.

The Shanghai composite index <.SSEC> fell 1.6 percent, bringing its year-to-date losses to 25 percent, the poorest performing equity market in Asia.

Hong Kong's Hang Seng index <.HSI> slipped 0.2 percent, with strength in financial stocks offset by weakness in utilities and energy shares, which sagged as oil prices retreated further from $75 a barrel.

Despite concerns that Beijing will maintain its curbs on property speculation, bargain hunters have their eyes peeled for opportunities in Chinese property-related stocks.

A survey of investors by Macquarie Securities showed that while 78 percent of respondents expected property prices to fall by the end of March 2011, the real estate industry was the top pick of where investors said they would increase exposure in the next six months.

In addition to being the most cited sector for H2 accumulation, property is even more favored than in our (bullishly toned) November 2009 survey, when a majority of respondents still expected property prices to continue rising, analysts at the bank said in a report.

Japan's Nikkei share average <.N225> slipped 0.1 percent, also surrendering early gains. It has had difficulty rising above its 25-day moving average, a technical gauge used by domestic investors.

Though Alcoa's results beat Wall Street's expectations, many investors anticipate that earnings forecasts will be revised downward given expectations for slowing economic activity in the United States and China.

The U.S. results season officially started on Monday, with the focus now on quarterly reports from JPMorgan on Thursday and General Electric on Friday.

Although there's a sense of selling fatigue, investor sentiment is still bearish, and the market is looking for a catalyst. Corporate earnings could be one, said Naoki Koga, a senior fund manager at Toyota Asset Management in Tokyo.

SOUTHEAST ASIA BULLS

Despite the reversal in major Asian bourses, Southeast Asia remains a bright spot among the region's equity markets.

Indonesia, the Philippines and Thailand were No 2, 3 and 4 in terms of performance so far this year. The benchmark index for the Philippines <.PSI> was at the highest in 2- years, while Thai stocks <.SETI> were just below a 2-year high hit on Monday.

A greater reliance on intra-Asian trade and attractive valuations have been largely behind the outperformance of Southeast Asia.

In currency markets, caution was key.

The euro held steady at $1.2595, with resistance seen roughly around $1.2690, the trendline from the December high.

Debt-laden Greece is seeking to raise 1.25 billion euros through a sale of six-month Treasury bills later in the day. That could prove to be a litmus test for the single currency in the short term.

A robust response to a Spanish debt auction earlier this month saw the euro rally to two-month highs.

The Australian dollar and Korean won, two of the usual targets of risk tolerant investors looking for higher returns, were down on the day and institutional investors maintained a cautious approach.

The way they are positioned, there is still a feeling that a double-dip recession could happen, said Jonathan Cavenagh, a currency strategist at Westpac, Sydney.

The Australian dollar slid 0.8 percent to US$0.8697, having stalled in the last three sessions below $0.8800.

The U.S. dollar was up 0.8 percent to 1212.60 won, up 9 percent since May.

The turnaround in Chinese equity markets also weighed on commodities, offsetting Alcoa's more bullish outlook for global aluminum demand.

U.S. crude oil futures also shed early gains and fell 0.7 percent to $74.39 a barrel, bringing losses to 13 percent since May.

(Additional reporting by Aiko Hayashi and Rika Otsuka in TOKYO)

(Editing by Kim Coghill)

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