GLOBAL MARKETS-Asian stocks reach two-month high on economic recovery hopes

* Sentiment improves as focus shifts to economic recovery
* Dollar slides as risk appetite grows
* Brent crude tests $40 for first time since March

By Stanley White and David Henry
TOKYO/NEW YORK, June 4 (Reuters) - Asian shares rose to a
two-month high on Thursday as expectations of further government
stimulus supported investor confidence in an economic recovery
from the global coronavirus pandemic.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.43%, earlier touching the highest since
March 9.
Shares in Australia .AXJO rose 0.93% after the country's
prime minister unveiled a fourth stimulus package to repair the
economy, this time aimed at the battered construction sector.
Chinese shares .CSI300 were little changed due to
lingering worries about diplomatic tension between the United
States and China, while U.S. stock futures ESc1 fell 0.15%.
Euro Stoxx 50 futures STXEc1 were down 0.03%, German DAX
futures FDXc1 were up 0.17%, while FTSE futures FFIc1 were
down 0.1%, suggesting a cautious start for European equities.
The euro held onto gains before a European Central Bank
meeting later on Thursday, where policymakers are expected to
increase debt purchases to support the bloc's weakest economies.
Oil prices fell, reversing gains made the previous session,
due to uncertainty about supply cuts by major producers.
Markets for risk assets have been on a tear in recent days,
carrying some stock market indexes to within sight of levels
before the coronavirus outbreak.
The Nasdaq Composite, .IXIC , the S&P 500 .SPX , and the
Dow Jones Industrial Average .DJI are close to overtaking
all-time closing highs registered in February.
"Liquidity provision by central banks – and expectations
that more is coming – is helping to support the recent drive in
risk markets," ANZ Research senior economist Liz Kendall and
strategist David Croy, said in a note early on Thursday.
Hong Kong's stock market .HSI fell 0.11%, hobbled by
concerns about Beijing's new national security law for the
former British colony and protests in the city's legislature
over a separate bill related to China's national anthem.
Chinese airline shares also fell after U.S. President Donald
Trump's administration said on Wednesday it will bar Chinese
passenger carriers from flying to the United States from June
16. Elsewhere in Asia, Japanese shares .N225 rose 0.41% and
South Korean stocks .KS11 gained 0.28%.
The euro EUR=EBS held near multi-month highs amid growing
expectations the ECB will increase the size of its 750 billion
euro ($669 billion) Pandemic Emergency Purchase Programme, when
it meets on Thursday.
The yield on the benchmark 10-year US10YT=RR eased
slightly to 0.7475% in Asia on Thursday.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, US2US10=RR reached 55 basis points on Wednesday, the
steepest level since mid-March. A steepening curve often points
to a stronger economy.
Governments around the world have gradually started to lift
tough lockdown measures imposed to contain the coronavirus which
has infected nearly 6.4 million people and killed over 379,000.
Markets await Friday's U.S. Labor Department May jobs
report, which is expected to show the unemployment rate soaring
to a post-World War Two high of nearly 20% from 14.7% in April.
On Wednesday, a report showed U.S. private payrolls fell
less than expected in May, suggesting layoffs were abating as
businesses reopen.
U.S. crude CLc1 fell 2.04% to $36.53 a barrel. Brent crude
LCOc1 fell 1.41% to $39.23 per barrel, having touched highs
above $40 a barrel for the first time since early March.
Spot gold XAU= rose 0.25% to $1,701.28 an ounce early on
Thursday after losing 1.6 % on Wednesday.

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