By Bansari Mayur Kamdar

Feb 6 (Reuters) -China shares fell on Monday as elevated Sino-U.S. tensions weighed on investor sentiment, while the Turkish lira hit a fresh record low as the U.S. jobs report renewed fears of more rate hikes from the Federal Reserve.

The Turkish lira TRY= was flat by 0912 GMT, after hitting a fresh all-time low of 18.85 against a firm dollar.

Piotr Matys, senior FX analyst at In Touch Capital Markets, said U.S. payrolls indicated the Fed was likely to remain in tightening mode for longer than markets currently anticipate, while President Tayyip Erdogan wants the Turkish central bank to cut interest rates.

"With inflation in Turkey at the still staggeringly high levels, real interest rates, assuming that the central bank cuts rates ahead of May elections, will fall even deeper into negative territory. That factor weighs heavily on the lira," Matys said.

Further weighing on sentiment, a 7.8 magnitude earthquake in central Turkey and northwest Syria killed more than 600 people and injured thousands as buildings collapsed across the region.

The MSCI's index for emerging market currencies .MIEM00000CUS fell 0.8% as worries of more rate hikes in the U.S. lifted the dollar, while the stocks index .MSCIEF dropped 2.2% and headed for their worst daily performance in nearly 3.5 months.

China stocks closed sharply lower, with Hong Kong's Hang Seng Index .HSI off 2% while China's blue chips CSI300 .CSI300 ended 1.3% down.

Adding to already strained relations between the world's two largest economies, a U.S. military fighter jet shot down a suspected Chinese spy balloon on Saturday, a week after it first entered U.S. airspace. Washington also cancelled a planned visit to Beijing by Secretary of State Antony Blinken.

Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said the balloon was "a U-turn moment in the lately improving relations between the U.S. and China."

"There is now a growing risk of escalation and (that) hammers nascent and still fragile sentiment in the Chinese stocks," she said.

In India, Adani group shares extended their selloff, bringing its cumulative market value loss to $112 billion, with some analysts worried about contagion to broader Indian markets.

Nigeria's dollar-denominated bonds fell after ratings agency S&P late on Friday affirmed the West African oil producer's credit rating at "B/B-" but turned negative on its outlook, citing risks to its debt servicing capacity.

Stocks in South Africa .JTOPI fell 0.5%. Offshore investors bought a net 1.17 billion rand ($67.03 million) of South African stocks last week, data showed.

South Africa's rand ZAR= slipped 0.3% against the dollar, with focus on the Investing in African Mining Indaba conference later in the day.

Reporting by Bansari Mayur Kamdar in Bengaluru, Editing by Kylie MacLellan

 
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