GLOBAL MARKETS-Stocks enjoy relief rally in Asia, bonds retreat

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei and S&P 500 futures rise in early Asia trade
* Market relieved at trade war truce, at least for now
* Treasury bonds off as market scales back bets on Fed
easing
* Dollar gains on safe-haven yen, gold retreats
* Oil prices jump as OPEC looks set to extend supply cuts
*

By Wayne Cole
SYDNEY, July 1 (Reuters) - Stocks rallied while bonds
retreated in Asia on Monday as a thaw in the Sino-U.S. trade
dispute tempered risks to the global economy, leading investors
to pare back wagers on aggressive policy easing by the major
central banks.
The dollar gained on the safe-haven yen as Treasury yields
jumped and futures reined in bets for a half-point rate cut from
the U.S. Federal Reserve this month.
"The Osaka truce has reduced the probability of escalation
in the near term, and slightly exceeded market expectations,"
said analysts at Barclays in a note.
"However, we do not think the likelihood of a deal has
necessarily increased," they warned. "It is probably in the best
interest of both parties to keep the talks running as long as
they can."
The early reaction was one of relief that no new tariffs
were launched and Nikkei futures Nkc1 climbed 1.6%. E-Mini
futures for the S&P 500 ESc1 likewise rose 1%.
Treasury futures TYc1 slid 13 ticks and Fed funds 0#FF:
dropped over 5 ticks as the market scaled back the probability
of a 50 basis-point rate cut this month to around 13%, from
nearer 50% a week ago. FEDWATCH
The United States and China agreed on Saturday to restart
trade talks after President Donald Trump offered concessions
including no new tariffs and an easing of restrictions on tech
company Huawei HWT.UL in order to reduce tensions with
Beijing.
China agreed to make unspecified new purchases of U.S. farm
products and return to the negotiating table. Still, no deadline was set for a deal and much damage has
already been done, with a survey of Chinese manufacturing out
over the weekend showing a continued contraction in new orders.
The official Purchasing Managers' Index (PMI) held at 49.4
in June, just missing forecasts. "Although a worst case outcome has been averted, the threat
of tariffs remains and it is unlikely the truce gives much
confidence to firms' investment and hiring decisions," said
Tapas Strickland, a director of economics at NAB.
"As such, it is likely that soft manufacturing conditions
will persist until if and when a fuller agreement is fleshed
out."
The reaction in currency markets was to strip some recent
gain from safe harbours like the yen and Swiss franc. The dollar
hopped up 0.5% on the yen to 108.44 JPY= and gained 0.3% on
the franc to 0.9792 CHF= .
The dollar added 0.2% on a basket of currencies .DXY , but
was little changed on the euro at $1.1364 EUR= .
The dollar's gains took some of the shine off gold, which
fell 1.2% to $1,392.56 per ounce XAU= .
Oil prices swung high in early trade on news OPEC and its
allies look set to extend supply cuts at least until the end of
2019 as Iraq joined top producers Saudi Arabia and Russia in
endorsing the policy. O/R
Brent crude LCOc1 futures rose 93 cents to $65.67, while
U.S. crude CLc1 gained 98 cents to $59.45 a barrel.

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(Editing by Sandra Maler)