GLOBAL MARKETS-Asian shares reverse early gains, euro falls to one-week lows

*U.S.- China trade tensions in focus. SYDNEY, Sept 3- Asian equities pared early gains on Thursday amid growing worries about Sino- U.S. relations while the euro hit a one-week low as traders wagered on central bank action to tame the single currency. A Bloomberg news report that China was planning sweeping policy changes to its semiconductor industry to fight U.S….

* MSCI ex-Japan drift away recent 2-1/2-year peak

* U.S.-China trade tensions in focus

* China’s Caixin shows sustained services sector recovery

* Wall Street climbs on defensive share gains

* Dollar gives back gains

By Swati Pandey

SYDNEY, Sept 3 (Reuters) – Asian equities pared early gainson Thursday amid growing worries about Sino-U.S. relations whilethe euro hit a one-week low as traders wagered on central bankaction to tame the single currency.

In early European trade, the pan-region Euro Stoxx 50futures and German DAX futures added 0.6% each,FTSE futures climbed 0.2% while France’s CAC 40 futuresrose 0.4%.

U.S. stock futures, the S&P 500 e-minis, faltered0.3%.

MSCI’s broadest index of Asia-Pacific shares outside ofJapan, which was up more than 0.5% earlier inthe session, slipped 0.1% with Chinese and Hong Kong sharesleading the losses.

The Hang Seng fell 0.7% while China’s blue-chip indexwas 0.5% lower.

A Bloomberg news report that China was planning sweepingpolicy changes to its semiconductor industry to fight U.S.restrictions added fuel to ongoing concerns about deterioratingrelations between the world’s two biggest economies, analystssaid.

Bloomberg reported, citing sources, China was planning asuite of measures to bolster research, education and financingfor the chip industry as part of its five-year plan next month.

The move comes after the United States said on Wednesday itwould now require senior Chinese diplomats to get StateDepartment approval before visiting U.S. university campuses orholding cultural events with more than 50 people outside missiongrounds.

Fears of a further escalation in tensions overshadowedpositive data showing China’s service sector activity grew for afourth straight month in August to stay above the 50-mark.

Elsewhere, Australia’s S&P/ASX 200 rose 0.9% andJapan’s Nikkei added 0.9% while South Korea’s KOSPIindex added 1.2%.

While analysts generally expect the equity markets rally toextend further led by massive central bank stimulus, theycautioned against rising risks.

“I think we’re now at a point where tactically it makessense to be more prudent than two or three months ago as thereare still a number of significant risks for investors to contendwith,” said Scott Berg, portfolio manager of T. Rowe Price’sglobal growth equity strategy.

“The economic recovery remains fragile and there is stillconsiderable uncertainty over the growth trajectory beyond theinitial rebound phase,” Berg said.

China-U.S. tensions and U.S. presidential elections wereother major risks, with a Democrat victory likely seeing a”major switch in policy direction and a different regulatory andtax regime,” he added.

On Wall Street overnight, the three major equity indexesmoved higher with gains led by defensive sectors such asutilities as the high-flying tech sectorpaused.

Data on Wednesday showed U.S. private employers hired fewerworkers than expected for a second straight month in August,suggesting that the labour market recovery wasslowing.

A separate report showed factory orders rose more thanexpected in July, pointing to continued improvement in themanufacturing sector.

In currencies, the euro slipped 0.4% to $1.1803 afterthe Financial Times reported that several members of theEuropean Central Bank’s (ECB) governing council were concernedthat the euro’s rise could weigh on the region’s growth.

That followed remarks on Tuesday from ECB’s chief economistPhilip Lane, who said the exchange “does matter” for monetarypolicy, which had begun the euro’s descent from above $1.20.

Westpac currency strategist Sean Callow said the FT reportwas “stoking some interest in next week’s ECB meeting at thevery least.”

The dollar rose against a basket of currencies to be up 0.3%. It was slightly higher on the safe haven Japanese yenat 106.25.

In commodities, U.S. crude dipped 0.2% to $41.42 abarrel. Brent crude fell to $44.27 per barrel. Gold wasslightly lower, with spot prices at $1933.98 an ounce.

(Editing by Jacqueline Wong and Sam Holmes)

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