GLOBAL MARKETS-Asian equities buoyed by China, auto merger but gains capped

* MSCI Asia ex-Japan +0.31%; Nikkei +0.39%
* Analysts see widespread uncertainty, continued risk
aversion
* Brent crude wavers around $70 per barrel
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Andrew Galbraith
SHANGHAI, May 28 (Reuters) - Asian shares edged up on
Tuesday lifted by gains in China and as auto firms climbed on
merger news, but broad uncertainties over trade and economic
growth kept a lid on gains.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS gained 0.31%, and U.S. S&P 500 e-mini futures
ESc1 rose 0.19% to 2,837.25.
Chinese blue-chips .CSI300 rose 1.02% a day after data
showed Chinese industrial firms' profits shrank in April, which
is expected to prompt more government stimulus to support the
slowing economy.
A planned increase in the weighting of Chinese A-shares in
MSCI indexes after the market close later on Tuesday also
boosted shares. Seoul's KOSPI .KS11 added 0.13%, while Australian shares
.AXJO were up 0.45%. Japan's Nikkei stock index .N225 gained
0.39%.
Despite the day's gains, Joanne Goh, Asia equity strategist
at DBS in Singapore, said that broad market sentiment remained
uncertain ahead of a possible meeting between the Chinese and
U.S. presidents at the G20 summit next month.
"There's still a lack of direction in the markets in terms
of all the different asset classes," she said.
"You actually see Chinese bond yields are ticking up, but
that shouldn't be the case because we are expecting stimulus and
bond yields should start to come off...there's quite a lot of
uncertainty in the markets right now."
Ten-year Chinese government bond futures for September
delivery, the most-traded contract, jumped 0.26% on Tuesday
after having dropped as much as 0.71% the day before, after
China's takeover of a troubled bank sparked concerns of wider
financial risks. "With economic indicators mixed and trade war risks
lingering, the bias is still tilted towards loose monetary
policy to cushion growth. We think that the rise in longer-term
(Chinese) govvie...yields is probably not warranted," DBS
analysts said in a note.
The equity market gains in Asia followed a relatively light
session in Europe on Monday, with UK and U.S. financial markets
closed for holidays.
European auto shares had rallied after Italian-American
carmaker Fiat Chrysler FCHA.MI confirmed it had made a
"transformative merger" proposal to French peer Renault
RENA.PA in a deal which would create the world's third-biggest
carmaker. That sector rally spilled into Asia with Mitsubishi
Motors Corp 7211.T in Japan adding 4.31% and Nissan Motor Co
7201.T gaining 2.51%.
Shares in Hong Kong-listed Geely Automobile Holdings Ltd
0175.HK jumped 6.11%.
​ Provisional results from EU elections also buoyed markets
after pro-union parties kept a firm grip on power in elections
to the European Parliament. The pan-European STOXX 600 .STOXX
added 0.22%. "Although Eurosceptic and anti-establishment parties didn't
win as many seats as expected, their influence has increased
significantly. This could have implications for the political
colour of key EU positions," said Rodrigo Catril, senior FX
strategist at National Australia Bank.
"The Parliament composition is also likely to have
implications on the priority agenda for future EU reform,
particularly with respect to things like immigration, fiscal
spending and fiscal union," he added, noting a decrease in bond
yields pointed to continued risk aversion.
The yield on benchmark 10-year German Bunds DE10YT=RR fell
to -0.147% on Monday, its lowest since September 2016.
On Tuesday, U.S. yields were also lower. Benchmark 10-year
Treasury notes US10YT=RR yielded 2.3061%. The two-year yield
US2YT=RR touched 2.1661%.
Trade worries remain high on investors' list of concerns.
U.S. President Donald Trump said on Monday that Washington was
not ready to make a deal with Beijing but he expected one in the
future, while at the same time pressing Japanese Prime Minister
Shinzo Abe to even out a trade imbalance with the United States.

The dollar was barely weaker against the yen at 109.47
JPY= , and fell 0.13% against the euro, with the common
currency buying $1.1181.
The dollar index .DXY , which tracks the greenback against
a basket of six major rivals, was 0.20% higher at 97.806.
In commodity markets, oil prices wavered after rising more
than 1% on Monday on tensions in the Middle East and OPEC-led
supply cuts, as well as continuing Russian supply disruptions
after a contamination problem discovered last month.
Brent crude LCOc1 was 0.1% lower at $70.04 per barrel,
having earlier dipped below the $70 mark, and U.S. West Texas
Intermediate crude CLc1 added 0.82% to $59.11 per barrel.
Spot gold XAU= was down 0.12% at $1,283.21 per ounce.
GOL/
Bitcoin BTC=BTSP , which on Monday touched $8,939.18, its
highest in more than a year, was up 0.3% at $8,797.4, turning
around from an earlier drop. The cryptocurrency topped $8,000
for the first time since July 2018 on May 13.