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GLOBAL MARKETS-Shares slip, yields rise as U.S. data sparks rate hike concerns

(Adds data, U.S. market opening)

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Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Herbert Lash and Elizabeth Howcroft

NEW YORK/LONDON, Dec 5 (Reuters) - Global stocks slid and Treasury yields rose on Monday as investors ignored an easing of China's pandemic restrictions that have weighed on global growth after fresh evidence of a strong U.S. economy raised fears interest rates will stay higher for longer.

U.S. services industry activity unexpectedly picked up in November, with employment rebounding, in the latest sign of underlying economic momentum that likely will keep the Federal Reserve's monetary policy tight as it fights high inflation.

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The Institute for Supply Management (ISM) said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October, which was the lowest reading since May 2020.

"It's all about the Fed. The Fed doesn't want the economy to fall apart, but they want the economy to slow to help counter inflation," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

"Good news on the economy is bad news for inflation, whether that's China opening up or lower gasoline prices."

Asian shares rose on hopes that China's steps to ease its zero-COVID policy would support global growth and increase commodity demand. But the ISM report on top of last week's strong U.S. jobs data unnerved investors as they try to assess when the Fed will eventually ease its tightening cycle.

MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.38% higher, but MSCI's gauge of stocks across the globe shed 0.61%.

The pan-European STOXX 600 index lost 0.33%, while on Wall Street, the Dow Jones Industrial Average fell 0.72%, the S&P 500 lost 1.04% and the Nasdaq Composite dropped 1.03%.

Euro zone business activity declined for a fifth month in November, final PMI data showed, suggesting the economy was sliding into a mild recession.

Treasury yields rose on expectations the Fed will continue to raise rates well into next year, though at a slower pace.

The inversion of the yield curve measuring the gap between yields on two- and 10-year Treasury notes deepened at -78.3 basis points. The inversion of the curve has been seen as a recession harbinger.

The yield on 10-year Treasury notes rose 7.8 basis points to 3.581%.

The dollar rose against the pound and the yen after the strong ISM data for November.

The Japanese yen weakened 1.48% versus the greenback at 136.34 per dollar, while sterling was last trading at $1.219, down 0.79% on the day.

The euro was down 0.26% to $1.0511.

Euro zone government bonds yields rose, with the benchmark German 10-year bund up 1.3 basis points at 1.889%.

The European Central Bank should raise interest rates by 50 bps on Dec. 15, French central bank chief Francois Villeroy de Galhau said on Sunday, reinforcing expectations for the ECB to slow the pace of monetary tightening after back-to-back 75 bp increases.

Investor attention remains focused on the pace of central banks ending their rate-hiking cycles. The Reserve Bank of Australia meets on Tuesday, and is expected to raise rates by a mere 25 basis points. The Bank of Canada meets on Wednesday and is expected to raise rates by 50 bps.

"We expect that growth will take the place of inflation as the main market focus at some point in the not-too-distant future," said Geraldine Sundstrom, a portfolio manager at PIMCO, in emailed comments.

"Central bank rhetoric is starting to point in that direction, but we won't know for sure until peak inflation is solidly in the review mirror."

Oil prices were mixed. U.S. crude futures fell 0.08% to $79.92 a barrel and Brent rose 0.25% at $85.78.

The Group of Seven price cap on Russian seaborne oil came into force on Monday as the West tries to limit Moscow's ability to finance its war in Ukraine. Russia has said it will not abide by the measure even if it has to cut production.

(Reporting by Herbert Lash; Additional reporting by Elizabeth Howcroft in London; Editing by Jane Merriman and Lisa Shumaker)