GLOBAL MARKETS-Asian shares tick higher, euro near 2-month lows before ECB decision

GLOBAL MARKETS-Asian shares tick higher, euro near 2-month lows before ECB decision

* Nikkei, Australian shares hit multi-month highs
* China shares rise on trade talk hopes
* Euro near 2-month lows after weak eurozone PMI
* Market focus on ECB rate decision later in the day

By Swati Pandey and Andrew Galbraith
SYDNEY/SHANGHAI, July 25 (Reuters) - Asian shares rose after
a cautious start, while the euro hovered near two-month lows as
soft economic data fuelled hopes the European Central Bank could
cut rates at its meeting on Thursday.
Those hopes are set to lift European shares, with pan-region
Euro Stoxx 50 futures STXEc1 up 0.45%, German DAX futures
FDXc1 up 0.43% and FTSE futures FFIc1 up 0.19% in early
European trade.
Japan's Nikkei .N225 touched nearly three-month highs
before trimming gains to be up 0.26%. Australian shares .AXJO
neared a 12-year peak, driven by expectations the ECB and the
Federal Reserve will soon lower borrowing costs.
"Lower rates are generally, in a traditional, mechanical
way, good news for equity prices," said Jim McCafferty, head of
equity research, Asia ex-Japan, at Nomura.
Chinese blue-chips .CSI300 added 0.48%, as investors
looked with hope to a face-to-face meeting between top U.S. and
Chinese negotiators next week, even if there are few signs that
it will produce real progress in the two countries' trade war.
But shares in South Korea .KS11 dropped 0.46% as leading
chipmakers shed recent gains amid trade tensions between Seoul
and Tokyo. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS , which had begun the day broadly unchanged, was
last up 0.23%.
On Wall Street, tech companies led the S&P 500 and the
Nasdaq to record highs on Wednesday after Texas Instruments Inc
TXN.N hinted the slowdown in semiconductor demand would not be
as long as feared. .N
Stock investors have generally been encouraged in recent
days by hopes of some headway in Sino-U.S. trade negotiations,
and expectations of easier monetary policy.
Cementing such expectations, a series of purchasing manager
index (PMI) readings in the United States and Europe on
Wednesday were weaker than expected.
"Equities have largely brushed off weaker global conditions
given the prospects for central bank easing, and an earnings
season that has so far seen around 78% of S&P500 companies
beating estimates," said Tapas Strickland, director for
economics and markets at National Australia Bank.
The Dow .DJI , however, fell 0.29% following disappointing
earnings from Boeing Co BA.N and Caterpillar Inc CAT.N .
After the closing bell, Facebook FB.O announced
forecast-beating revenues for the second quarter, sending its
shares higher in extended trading.
The stock has surged over 56% so far this year, despite
warnings on future revenue growth from new data privacy rules
and forthcoming privacy-focused product changes. Market attention on Thursday will be squarely on the ECB
rate decision after PMI data showed euro zone manufacturing
contracted for the sixth straight month.
That dragged the single currency EUR=D3 to $1.1125, a
level not seen since late-May. It was last at $1.1135
"With a rate cut priced at 50%, markets are expecting at
least a dovish turn from (ECB chief) Mario Draghi," ANZ said in
a note.
In the United States, manufacturing activity slowed to a
10-year low in early July with production volumes and purchases
falling. But Nomura's McCafferty said that given the unclear ability
of ever-looser monetary policy to jump-start growth, global
investors are increasingly looking to signs of fiscal support.
"I think that governments around the world are looking to
show a bit of muscle and put some money into the economy,
whether that's through tax cuts or spending plans," he said.
The dollar index .DXY , tracking the greenback against six
major currencies, was a touch lower at 97.707. Against the
Japanese yen, the dollar was down 0.09% at 108.07.
The weak global backdrop has seen bond prices rise, with
U.S. 10-year yields US10YT=RR down to 2.0444% from Wednesday's
close of 2.05%. German 10-year Bund yields DE10YT=RR were at
-0.38% while the Feb-2029 Bund was near record lows, yielding
-0.422%. Sterling GBP= was flat at $1.2480, after falling for
several sessions as market participants feared the looming
possibility of a no-deal Brexit under Britain's new prime
minister, Boris Johnson.
"If talks between the UK and EU break down, the GBP could
see further losses," said Steven Dooley, currency strategist at
Western Union Business Solutions.
In commodities, U.S. crude CLc1 added 20 cents to $56.08
per barrel while Brent crude LCOc1 climbed 15 cents to $63.33.
Spot gold XAU= slipped 0.2% to $1,423.09 an ounce, short
of last week's peak of $1,452.60.

(Editing by Jacqueline Wong)