(updates prices)
* Steel, iron ore futures down
* Follow big falls on Friday
* Market ignores positive China data
By James Regan
SYDNEY, Feb 6 (Reuters) - China steel and iron ore futures retreated further on Monday despite positive signs of growth in the country's services and manufacturing sectors, with investors digesting last week's unexpected rise in short-term interest rates.
While the hikes by the central bank were modest, they reinforced views that Beijing is intent on containing capital outflows and reining in risks to the financial system created by years of debt-fuelled stimulus.
"Adding to the negativity around Beijing's response to the financial markets, steel inventories rose between the start and end of the Lunar New Year and there are high inventories of iron ore at the ports, so investors are reluctant to keep buying," a trader in Shanghai said on condition of anonymity.
The most active rebar on the Shanghai Futures Exchange SRBcv1 closed the afternoon session 2.9 percent lower at
3,082 yuan ($449). On Friday, the contract lost 6.8 percent.
Iron ore on the Dalian Commodity Exchange DCIOcv1 dropped 3.67 percent to 603 yuan, after losing 5.4 percent on Friday.
The trader added that although markets reopened on Friday from the week-long Lunar New Year holiday, most investors were only just "getting their feet back in the markets".
Countering negative sentiment around the hikes, growth in China's services sector remained strong in January and prompted companies to hire staff at the fastest pace in 20 months.
The strong reading mirrored improvements in manufacturing surveys last week, giving China's policymakers more room to focus on containing the financial risks from a sharp rise in debt.
Elsewhere, shipping interruptions caused by stormy weather cut iron ore shipments to China from Australia's Port Hedland terminal in January by 7.8 percent from a month ago.
The port, used by BHP Billiton (LON:BLT) BHP.AX and Fortescue Metals Group FMG.AX , saw exports to China slip to 34.5 million tonnes from 37.4 million tonnes in December, after a tropical low swept across the Pilbara iron ore district on Jan. 27, triggering an emergency clearing of vessels for just under 18 hours. ($1 = 6.8625 Chinese yuan)