Asian shares pare gains as China markets slump

Asian stocks erased most of their gains on Wednesday as Chinese shares slumped despite upbeat economic data, while the yen was steady after the Bank of Japan slightly trimmed its economic growth projection.

Investors continued to await other key events, including a Greek parliamentary vote on austerity measures and congressional testimony by the US Federal Reserve chief.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat as Chinese shares skidded, with Shanghai's benchmark composite index down 2.5%, and the CSI300 index of the largest listed companies in Shanghai and Shenzhen falling 2.6%.

China's second quarter gross domestic product grew an annual 7%, steady with the previous quarter and slightly better than analyst forecasts. Fixed-asset investment and industrial output growth also beat economists' forecasts.

Further stimulus is still expected after the quarter ended with a savage correction that shaved about 30% off share market value since last month, before Beijing's support steps stemmed the freefall.

"Stock investors at present care more about what the government policy towards the market is, whereas the connection between the economy and the market has somehow loosened," said Zhang Qi, senior stock analyst at Haitong Securities in Shanghai.

Japan's Nikkei stock index advanced 0.4% by midday, as investors awaited BOJ Governor Haruhiko Kuroda's post-meeting press conference at 0630 GMT.

The BOJ kept monetary policy steady as expected and mostly maintained its upbeat inflation forecasts, even as it cut its growth outlook on soft exports and household spending.

Later on Wednesday, Greece will take the spotlight as Athens will vote on a sweeping austerity package to secure the funding it needs to stem its fiscal crisis and remain in the euro zone.

Congressional testimony by Federal Reserve Chair Janet Yellen later in the session Wednesday will be closely monitored for any further hints regarding the timing of a US interest rate hike, particularly after a surprise fall in US retail sales on Tuesday.

Core retail sales slipped 0.1%, much worse than economists' forecasts for a 0.4% rise.

The unexpected drop backed the view that the Fed might hold off on hiking rates, which gave Wall Street a lift. All three major indexes ended higher.

"People are not taking any aggressive positions ahead of Yellen. Some people are buying the dollar on dips," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

The upbeat Chinese data initially reassured investors and pushed up Treasury yields, which in turn lifted the dollar. The yield on benchmark 10-year notes was last at 2.404%, up from its US close of 2.399% on Tuesday.

The dollar edged up about 0.1% on the day to 123.45 yen, while the euro edged about 0.1% lower to $1.1000.

Against the yen, the euro was buying 135.83 yen, slightly higher on the day.

Crude futures were higher after it became apparent that a nuclear deal between Tehran and six global powers will not immediately remove sanctions placed on Iranian crude exports.

US crude was up about 0.4% at $53.27 a barrel, while Brent added 0.3% to $58.68.