GLOBAL MARKETS-Asian shares near 2-month highs before U.S. payrolls test

(Updates prices throughout)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asia's MSCI index ex-Japan headed for 5th straight weekly
gain
* Investors focussed on U.S. non-farm payrolls
* Global bond yields near record lows on easy policy
expectations

By Swati Pandey
SYDNEY, July 5 (Reuters) - Asian shares hovered near
two-month highs on Friday as investors braced for U.S.
employment data, a key release that could stoke or temper market
expectations about aggressive policy easing by the Federal
Reserve.
Trade across global markets was expected to remain subdued
following the Independence Day holiday in the United States on
Thursday and ahead of the non-farm payrolls report.
In early European trade, the pan-region Euro Stoxx 50
futures STXEc1 were flat as were futures for German DAX
FDXc1 and London's FTSE FFIc1 . E-Minis for the S&P500 ESc1
advanced about 0.1%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was set for its fifth straight weekly rise,
which took it to 534.40, the highest since early May. It was
last a tick lower at 532.65.
Japan's Nikkei .N225 added 0.2%. Chinese shares were
slightly higher with the blue-chip index .CSI300 up 0.5%.
Australia and New Zealand shares gained, too, while Hong Kong's
Hang Seng index .HSI and South Korea's KOSPI were mostly
steady.
World stocks and bonds have rallied since June on hopes
global central banks will keep policy easy to support growth. A
ceasefire in the protracted Sino-U.S. trade war has also
bolstered sentiment.
All eyes were now on U.S. non-farm payrolls, due later in
the day, which are expected to have jumped by 160,000 in June
compared with 75,000 in May. "If payrolls were not to rebound this would be very
significant," said Tapas Strickland, London-based markets
strategist at National Australia Bank.
"A weaker than expected read would increase expectations of
an emergency 50 basis points rate cut in July given that two
soft payrolls are very rare with the last being back in 2012,"
he said.
"A better-than-expected print would likely see markets pare
expectations of a July rate cut, though given the deterioration
in other domestic data as well as international PMIs, a July
rate cut of 25 basis points remains highly likely."
Fed futures 0#FF: are fully pricing in a 25-basis-point
cut when the Fed meets on July 30-31. Investors also see a 25%
chance of a 50-basis-point reduction.
The Fed would not be alone in embarking on easier monetary
policy.
Australia's central bank has cut its cash rate by 50 basis
points since June while leaving the door ajar for a third move
this year. In the euro zone, financial markets expect the bloc's
central bank to lay out the landscape for further monetary
easing at its July 25 meeting. Prospects of global easing have sent government bond yields
to multi-year lows around the world.
Germany's 10-year government bond yield DE10YT=RR , a
benchmark for euro zone debt, fell to minus 0.4% and matched the
European Central Bank's deposit rate for the first time - a sign
that markets are expecting rate cuts. Yields on U.S. 10-year Treasuries US10YT=RR hit their
lowest since November 2016 at 1.946%.
The currency market was mostly sidelined ahead of the U.S.
jobs figures.
The dollar index .DXY was steady at 96.797. It is up 0.7%
so far this week.
"This resilience in the US dollar is, in part, due to its
role as a safe-haven and the persistence of global trade and
geopolitical tensions – even after the US-China agreed to a
truce," Westpac wrote to clients in a note.
"At least of equal significance, however, is the fact that
the FOMC is now not the only central bank ready to ease policy.
Most notable is that the ECB intend to follow suit."
The dollar index, which measures the greenback against a
basket of major currencies, fell 1.7% last month as investors
priced in a 50-basis-point cut from the Fed.
Those expectations faded in recent days on more reserved Fed
commentary, but they have revived after underwhelming U.S.
economic data.
A weaker greenback and soaring prices of iron ore -
Australia's top export earner - have boosted the Aussie dollar
AUD=D3 despite a rate cut on Tuesday. The currency is so far
up 1.4% this week and last held at $0.7025. Against the Japanese yen JPY= , the dollar gained 0.1% to
107.92.
The euro traded at $1.1273 EUR= , a touch higher from its
two-week low of $1.1268 seen on Wednesday.
In commodity markets, oil prices eased with Brent crude
futures LCOc1 , the international benchmark for oil prices, off
11 cents at $63.19 per barrel while U.S. crude slipped 65 cents
to $56.71.
Spot gold XAU= fell 0.1% to $1,413.76 an ounce.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Sam Holmes & Kim Coghill)