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

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

(Updates data; repeats to add headline tag, no change to text)
By Tom Arnold
LONDON, July 8 (Reuters) - Global stocks were in a muted
mood on Monday after strong U.S. job gains tempered expectations
the Federal Reserve will deliver a large rate cut, while
Deutsche Bank shares turned negative 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. After earlier touching their highest level since early May,
Deutsche Bank DBKGn.DE shares slumped 3.3% as investor
enthusiasm fizzled out for 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. European stocks moved little, with the pan-European STOXX
600 index .STOXX adding 0.04%.
Among top movers on the STOXX 600 were TGS Nopec TGS.OL ,
up 6.7% on a well-received earnings update. U.S. futures pointed to a lower opening for Wall Street,
with E-Minis for the S&P500 ESc1 at -0.2%.
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 the open to hit a
new February 2015 high before erasing gains and slipping 1.3% as
traders booked profits 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 as much as 2% against the dollar 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.
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 97.233 .DXY , down marginally on
the day but near the 3-week high of 97.443 hit on Friday.
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 edged
down to $1.2530 GBP=D3 .
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 edged down with Brent crude
futures LCOc1 down 0.09% to $64.18. U.S. West Texas
Intermediate (WTI) CLc1 was 0.12% down at $57.44 a barrel.
Spot gold XAU= gained 0.4% to $1,404.48 an ounce.