By Julie Zhu

HONG KONG (Reuters) - Asian stocks fell on Thursday pausing the heavy gains made this week, as fresh Chinese data showed prolonged weakness in the property sector and dented some of the recent optimism about a recovery in the world's second-largest economy.

While data released this week showed China's industrial and retail sectors making a comeback, a sharp drop in property investment and weak home prices suggest persistent problems in the sector that could drag on the country's overall recovery.

Meanwhile, Japanese exports grew for a second straight month in October but at a sharply slower pace due to slumping China-bound shipments of chips and steel.

"The weak economic data from both countries indicate the fact that the global economy is slowing down, highlighting ongoing macro headwinds that businesses face," said Tina Teng, market analyst at CMC Markets (LON:).

"China's housing crisis remained a major issue for the economy and weakened global consumer demands will likely continue to press on sentiment."

European markets were set for a lower open, with pan-region down 0.21%, German falling 0.11% and dropping 0.11%.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4% in afternoon trade although the index is up 7.1% so far this month.

Australian shares were down 0.67% as strong wages data indicated that inflationary pressures were still running high. stock index slid 0.18% as investors sold stocks to lock in profits from the previous session's sharp gains.

The index, MSCI Emerging Market index and Nikkei all posted their biggest gains in a year, of 2.5% or more, on Wednesday.

In China, stocks fell on Thursday partially because investors were disappointed by a top level Sino-U.S. meeting, with Shanghai's blue-chip CSI300 index down 0.72% and Hong Kong's dropping 1%.

While U.S. President Joe Biden and Chinese leader Xi Jinping had agreed to resume military-to-military communications and cooperate on anti-drug policies, a sign ties were improving, some investors were disappointed at the lack of any major breakthroughs in the talks.

On Wednesday, U.S. stocks closed slightly higher, as inflation data reinforced investor hopes the Fed is done raising interest rates, while retail stocks were boosted by an upbeat forecast from Target.

The rose 0.47%, the gained 0.16% and the narrowed earlier gains to end flat.

Money market traders have fully priced in the odds that the U.S. central bank will keep rates steady in December, as per CME Group's (NASDAQ:) Fedwatch tool. They also see the first rate cut of the cycle to kick off in May 2024.

Investors are increasingly pricing in more rate cuts next year with bond yields and the dollar coming under downward pressure. Some of that reversed on Wednesday, with Treasury yields and the dollar rebounding slightly from the previous session's fall.

The yield on benchmark was at 4.5039% compared with its U.S. close of 4.537% on Wednesday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.8989%compared with a U.S. close of 4.916%.

In currencies, the European single currency was up 0.1% on the day at $1.0837, having gained 2.47% in a month, while the , which tracks the greenback against a basket of currencies of other major trading partners, was up at 104.48.

dipped 0.9% to $75.97 a barrel. fell to $80.44 per barrel.

Gold was slightly higher. was traded at $1963.29 per ounce. [GOL/]