* European shares seen opening down, on track to snapwinning steak
* Spike in China's short-term rates underscores tighteningfears
* Nikkei tumbles 2 percent, reversing rise as yen jumpsagainst dollar
* Fed tapering expectations pushed to next year afterpayrolls disappoint
* U.S. 10-year Treasury yield wallows at lowest levels sinceJuly
By Lisa Twaronite
TOKYO, Oct 23 (Reuters) - Asian stock markets surrenderedearly gains on Wednesday on fears of tighter policy in China,while the dollar dropped after tepid U.S. jobs data vanquishedexpectations that the Federal Reserve will taper its stimulusbefore next year.
European markets were tipped to open lower and could snaptheir nine-session winning streak.
Financial spreadbetters predicted Britain's FTSE 100 will open 15 to 23 points lower, or as much as 0.3 percent;Germany's DAX will open 13 to 27 points lower, alsodown as much as 0.3 percent; and France's CAC 40 willopen 12 to 22 points lower, or as much as 0.6 percent.
U.S. S&P 500 E-mini futures were down 0.3 percent,after the S&P 500 Index closed at a record high in NewYork on Tuesday.
Japan's Nikkei share average ended down 2 percent asa stronger yen took a heavy toll, after shares touched a 3-1/2week high in the morning session.
Australian shares shed 0.3 percent after scaling afive-year peak, dragged down by stronger-than-expected inflationdata which reduced expectations for another interest rate cut.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, on track to post its firstloss in five sessions, while profit-taking pushed Seoul shares off their highest level in more than 26 months.
"A story that Chinese banks have tripled debt write-offs inthe first half of this year appears to have prompted some profittaking with Asia markets near multi-week highs," Michael Hewson,chief market analyst at CMC Markets UK, wrote in a researchnote.
A rise in China's short-term money rates alsounderscored investors' fears that regulators there are poised totighten liquidity to quell growing inflationary pressures.[ID:nL3N0ID0XN}
The benchmark seven-day repo contract, which hadbeen steadily sliding since Oct. 9, spiked in the morningsession, a day after a policy adviser to the People's Bank ofChina (PBOC) told Reuters that the authority may tighten cashconditions in the financial system to address inflation risks.
Most Asian markets had firmed in early trade, tracking WallStreet gains as the weak jobs report reinforced expectationsthat the Fed will maintain its aggressive stimulus well intonext year.
The report showed nonfarm payrolls increased by 148,000workers in September, less than expected.
It suggested the economy was losing momentum even before theU.S. fiscal standoff that partially shut down the governmentfor more than two weeks, lending credence to the central bank'sdecision to hold off on reducing its stimulus.
Strategists at Barclays pushed out their expectation for thefirst Fed tapering in the pace of its asset purchases to March2014 from December 2013, and many market participants concurred.
Nine of 15 U.S. primary dealers surveyed by Reuters onTuesday expect the Fed to begin tapering its $85 billion-a-monthbond-buying programme in March.
DOLLAR UNDER PRESSURE
The dollar tumbled 0.7 percent against its Japanesecounterpart to 97.40 yen, after as low as 97.25 yenearlier, its lowest since Oct. 9.
The euro was slightly down at $1.3773, after risingas high as $1.3793 on the EBS trading platform, its strongestsince Nov. 2011.
In the near-term, the dollar could see further weaknessagainst other major currencies such as the euro and sterling,said Sim Moh Siong, FX strategist for Bank of Singapore, addingthat the euro may rise towards levels around $1.39.
"I think there's certainly a high possibility that dollarweakness might extend a bit further, but I'm not really surethat it changes the medium-term dollar picture," Sim said.
The dollar index last stood at 79.217, after it fellto its weakest in eight months at 79.137 earlier, within sightof its 2013 low of 78.918 touched in February.
The Australian dollar was last down 0.6 percent against itsU.S. counterpart in a whipsaw session that saw it jump about aquarter of a U.S. cent after the CPI report.
The yield on benchmark 10-year Treasury notes fell to 2.492 percent, its lowest since late July, after closingU.S. trade at 2.512 percent.
That helped push the yield on the 10-year Japanesegovernment bond to a five-month low of 0.600 percent.
On the commodities front, concerns about a near-term U.S.crude surplus helped push U.S. crude prices down about0.5 percent to $97.82 a barrel. Brent crude gave up 0.3percent to $109.70 a barrel, supported by a weaker dollar.
Copper slipped from near one-month highs as tradersbooked profits after the U.S. jobs report reinforced the metal'sweak fundamental outlook, falling 1.0 percent to $7,261.75.
Gold fell 0.2 percent lower to $1,336.51 an ounce,having risen to a four-week high after the payrolls data.
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