(Updates at 0515 GMT)

By Stella Qiu

SYDNEY, Oct 15 (Reuters) - Asian stocks edged lower on

Tuesday, contrasting with a strong Wall Street close and

investor optimism about corporate earnings, while the dollar

held near a two-month top, aided by bets on a smaller U.S. rate

cut next month.

Oil prices fell about 3% after Israeli Prime Minister

Benjamin Netanyahu reportedly told the United States that Israel

is willing to strike Iranian military targets and not nuclear or

oil ones, easing immediate concerns about supply disruptions.

The Nikkei rallied more than 1% to a three-month

peak, having been closed on Monday for a holiday. MSCI's

broadest index of Asia-Pacific shares outside Japan

eased 0.26% as gains in Taiwan and Australia

were overshadowed by a drop in Chinese markets.

China's blue chips fell 1.08%, while Hong Kong's

Hang Seng index slid nearly 2% as a lack of new stimulus

details from Beijing left investors wanting for more.

Chinese media reported Beijing may raise an additional 6

trillion yuan ($850 billion) from Treasury bonds over three

years to help bolster a sagging economy.

"China's signal on policy stimulus prompted us to go

modestly overweight, especially given depressed valuations.

Details have been scant, so we could change our view if future

announcements disappoint," said analysts at BlackRock Investment

Institute.

"We still like U.S. stocks and the broad AI theme as

corporate earnings growth expands beyond tech. Yet fears over

stretched valuations can drive brief selloffs. This calls for

considering global exposure where we see cheap valuations and

potential catalysts."

Overnight, the S&P 500 and Dow roared to record high

closes, led by chip stocks after a 2.4% jump in AI darling

Nvidia ( NVDA ) and a brisk start to the third-quarter earnings

season with beats by JP Morgan and Wells Fargo ( WFC ).

Other big banks including Citi, Bank of America ( BAC )

and Goldman Sachs ( GS ) will report quarterly results

on Tuesday.

Stock futures edged higher on Tuesday, with S&P 500 futures

ticking up 0.06% while Nasdaq futures rose 0.02%.

EUROSTOXX 50 futures added 0.28%. FTSE futures

last traded 0.34% higher.

In the foreign exchange market, the dollar slipped

0.12% to 149.60 yen, pulling back from a 2-1/2-month high of

149.98 overnight. The euro eased 0.17% to $1.0890,

languishing near the 10-week trough overnight, ahead of a rate

decision from the European Central Bank on Thursday.

The dollar has been buoyed by conviction the Federal Reserve

will choose a smaller 25 basis point rate cut next month, rather

than a 50 bp move, given the economy continues to grow without

overheating.

Fed Governor Christopher Waller on Monday called for "more

caution" on interest-rate cuts ahead, while Fed Minneapolis

President Neel Kashkari sees more modest rate cuts ahead.

Traders are pricing in about an 88% probability the Fed

will cut rates by 25 basis points next month and a 12% chance it

would leave rates unchanged, according to CME's FedWatch.

The U.S. bond market was shut for a holiday on Monday, but

cash Treasuries fell slightly in early Asia trade. Two-year

Treasury yields are up 2 basis points to 3.9665%,

while 10-year yields steadied at 4.0944%.

Oil extended its declines for a third straight session on

demand concerns and as the jitters about Israel's attack on Iran

calmed. Brent futures fell 3.7% to $74.58 a barrel,

having dropped 2% overnight.

Gold was 0.41% lower at $2,640.12 an ounce.