GLOBAL MARKETS-Global shares muted as prospect of sharp U.S. rate cut fades

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Strong U.S. payrolls temper Fed rate cut expectations
* Deutsche Bank shares rise on overhaul move
* Turkish lira near 2-week lows on c.bank independence
worries
* Greek bond yields hit new lows after election

By Tom Arnold
LONDON, July 8 (Reuters) - Global shares were in a muted
mood on Monday after strong U.S. job gains tempered expectations
the Federal Reserve will deliver a large rate cut, but Deutsche
Bank gained nearly 4% as it launched a major restructuring.
Sentiment was also dampened by U.S. investment bank Morgan
Stanley's decision to reduce its exposure to global equities due
to misgivings about the ability of policy easing to offset
weaker economic data.
In Turkey, the lira, stocks and government dollar bonds
weakened after President Tayyip Erdogan dismissed the central
bank governor, a move that fuelled worries about monetary policy
independence. Deutsche Bank DBKGn.DE shares touched their highest since
early May as investors welcomed the bank's move to cut 18,000
jobs around the world as part of a restructuring plan that will
cost 7.4 billion euros. Shares in other European investment banks UBS, Credit Suisse
and Societe Generale were up more than 1%, while Barclays is up
0.3% and HSBC is down around 1%.
Deutsche Bank's news helped limit the downbeat sentiment in
broader Europe, with the pan-European STOXX 600 index .STOXX
adding 0.07%.
Among top movers on the STOXX 600 were TGS Nopec TGS.OL ,
up 7.1% on a well-received earnings update. In Asia there was a wide sell-off in stocks, with MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS losing 1.4% and China's blue-chip CSI300 index
.CSI300 down 2.32%, its biggest daily loss since May 17.
"We are lowering our exposure to global equities to the
range we consider 'underweight'," Morgan Stanley's London-based
strategist Andrew Sheets said in a note. The previous range was
'neutral'.
Expensive valuations and pressure on earnings were among the
reasons for the downgrade, Sheets said, while the bank increased
its exposure to emerging markets sovereign credit and safe haven
Japanese government bonds.
Since the start of the year, global equities have generally
been bolstered by expectations that central banks will keep
interest rates at or near record lows to boost economic growth.
Those expectations were tempered by a U.S. labour report on
Friday that showed nonfarm payrolls jumped 224,000 in June,
beating forecasts for 160,000, in a sign the world's largest
economy still had some fire.
Given the strength shown in that data, investors now expect
U.S. Federal Reserve Chairman Jerome Powell to go slow on rate
cuts this year.
"The re-adjustment in expectations did push the dollar
higher and had a negative effect on Asia but Europe has been
supported by investors saying 'whatever the Fed does, the ECB
[European Central Bank] will still cut'," said Andrew Milligan,
head of global strategy at Aberdeen Standard Investments.
Trading is expected to be subdued ahead of Powell's
semi-annual testimony to the U.S. Congress on Wednesday, which
will provide further clues on the near-term outlook for monetary
policy. The Greek stock index .ATG rallied at first before erasing
gains and slipping 1.2% after Greece's opposition conservatives
returned to power with a landslide victory in snap elections on
Sunday.
Greek 10-year bond yields fell by 14 basis points in early
trade to hit new all-time lows of 2.016%, reversing the 12 basis
point yield rise on Friday. AND GEOPOLITICS
There was some positive news on the protracted China-U.S.
trade war, with White House Economic adviser Larry Kudlow
confirming that top representatives from the United States and
China will meet in the coming week for trade talks. "Whether the negotiators can find a solution to the
difficult structural issues that remain between the two sides is
another matter, and Kudlow cautioned there was 'no timeline' to
reach an agreement," National Australia Bank strategist Rodrigo
Catril said.
In currency markets, action was in the Turkish lira TRY=
which weakened 2% against the dollar, the lowest since June 28,
after Turkey's central bank governor Murat Cetinkaya, whose
four-year term was due to run until 2020, was replaced by his
deputy Murat Uysal. President Erdogan sacked Cetinkaya for refusing the
government's repeated demands for rate cuts, laying bare
differences between them over the timing of interest rate cuts
to revive the recession-hit economy.
The dollar index stood at 97.229 .DXY in early London
trading, below the near three-week high of 97.443 it hit on
Friday after last week's strong U.S. jobs data lowered
expectations for a sharp Federal Reserve interest rate cut.
The euro, which dropped to $1.1208 EUR=EBS on Friday,
traded at $1.1225, unchanged on the day.
After hitting a six-month low to the dollar on Friday as a
result of poor economic data and a rise in expectations that the
Bank of England will cut interest rates, the British pound was
last quoted at $1.2513 GBP=D3 , down 0.2% on the day.
Geopolitics may be in focus this week following news on
Sunday that Iran will boost its uranium enrichment, in breach of
a cap set by a landmark 2015 nuclear deal. "So far U.S.-Iran tensions have not had a material impact on
markets, but if tensions escalate it could be a different
story," said NAB's Catril.
In commodity markets, oil prices rose with Brent crude
futures LCOc1 up 8 cents at $64.31. U.S. West Texas
Intermediate (WTI) CLc1 was up 6 cents at $57.57 a barrel.
Spot gold XAU= gained 0.4% to $1,405.77 an ounce.