Chinese stocks fell 2 percent on Tuesday on reports that Beijing will not relax tougher property measures any time soon, weighing on the Australian dollar and curbing early gains in Asian shares.

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 touched a nerve among investors, who are already sensitive to how much China's economy is slowing.

Alcoa , the largest U.S. aluminum producer, lifted its outlook for global consumption of the metal and posted surprisingly strong quarterly results, lending Asian markets some initial support. But the focus soon turned squarely to volatility in China's stock markets.

The Shanghai composite index <.SSEC> fell 2 percent, bringing year-to-date losses to 25 percent, the poorest performing equity market in Asia.

Hong Kong's Hang Seng index <.HSI> was nearly unchanged on the day, with strength in financial stocks offset by weakness in utilities and energy shares.

Japan's Nikkei share average <.N225> fell 0.4 percent, surrendering early gains. It has had difficulty rising above its 25-day moving average, a technical gauge used by domestic investors.

Many investors were anticipating earnings forecasts to be revised downward given expectations for slowing economic activity in the United States and China.

The U.S. results season officially starting 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 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.

I think they could be in for a major surprise if a majority of U.S. corporate results beat expectations. That should see the U.S. dollar stage a comeback and hence investors are a bit cautious about going too short.

The Australian dollar slid 0.4 percent to US$0.8735, having stalled in the last three sessions below $0.8800.

The U.S. dollar was up 0.5 percent to 1209.40 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.

Three-month copper futures traded on the London Metal Exchange was down 0.3 percent, resting right on top of the 14-day moving average.

U.S. crude futures shed early gains and was down 0.4 percent at $74.68 a barrel, down 13 percent since May.

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

(Editing by Kim Coghill)

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