REFILE-GLOBAL MARKETS-Asia stocks gain amid Mexico reprieve, firmer Chinese shares

(Fixes typos in paragraphs 13,14)
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Afterglow of US-Mexico relief, firmer China shares support
Asia
* Dollar extends gains as rebound in U.S. yields continues
* Crude oil finds some traction after previous day's slide

By Shinichi Saoshiro
TOKYO, June 11 (Reuters) - Asian stocks, led by Chinese
shares, gained on Tuesday as markets basked in relief following
the U.S. decision to hold off from imposing import tariffs on
Mexico as the two governments agreed a deal to combat illegal
migration from Central America.
Hopes that U.S. interest rates will be cut as early as next
week also provided support.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS gained 0.65%.
The Shanghai Composite Index .SSEC climbed 1.7% after
China said on Monday that it will allow local governments to use
proceeds from special bonds as capital for major investment
projects in a bid to support the slowing economy. Australian stocks .AXJO rose 1.3%, South Korea's KOSPI
.KS11 added 0.3% and Japan's Nikkei .N225 edged up 0.35%.
U.S. stocks extended their recent climb on Monday, with the
Dow .DJI rising for the sixth trading day.
Relief that the United States had stepped back from an
immediate imposition of tariffs on Mexico encouraged buyers,
though U.S. Secretary of State Mike Pompeo warned the United
States could still slap tariffs on Mexico if not enough progress
was made on its commitment to stem illegal immigration.
.N
While global markets have been given some reprieve, fresh
U.S. trade threats against China were seen limiting any major
boost to investor sentiment.
U.S. President Donald Trump said on Monday he was ready to
impose another round of punitive tariffs on Chinese imports if
he cannot make progress in trade talks with Chinese President Xi
Jinping at the G20 summit. The U.S. president has repeatedly said he expected to meet
Xi at the June 28-29 summit in Osaka, Japan, although China is
yet to confirm any such meeting.
"The lift from the U.S.-Mexico trade development is likely
to be a temporary one for the equity markets as the bigger issue
between the United States and China remains unresolved," said
Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset
Management.
"Nervousness will prevail in the markets until the G20
summit. And there is no guarantee that matters will improve even
if the U.S. and Chinese leaders meet at the summit."
Economists at Societe Generale said in a note that "the
probability of the U.S.-China trade conflict drawing to an
amicable conclusion has decreased significantly over the past
few weeks."
In the currency markets, the dollar extended gains it made
against its peers in the wake of Friday's agreement between the
United States and Mexico.
The dollar index against a basket of six major currencies
.DXY was a shade higher at 96.800 after advancing 0.2% on
Monday.
The dollar was up 0.15% at 108.625 yen JPY= and the euro
EUR= was steady at $1.1314 following a loss of 0.2% the
previous day.
The benchmark U.S. Treasury 10-year yield US10YT=RR
stretched an overnight spike and touched an 11-day peak of
2.157%. The yield had risen about 6 basis points on Monday as
the U.S.-Mexico deal boosted risk appetite and curbed investor
demand for safe-haven government debt.
The Treasury market has experience volatility over the past
week, with the 10-year yield having fallen to a near two-year
low of 2.053% on Friday after a soft U.S. jobs report raised
expectations for an interest rate cut by the Federal Reserve.
The Fed holds its next policy meeting on June 18-19.
The prospect of the central bank lowering rates this year
had already risen earlier last week after a number of Fed
officials including Chairman Jerome Powell hinted they were open
to easing monetary policy.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1
were up 0.36% at $53.45 per barrel, finding some traction after
sliding the previous day.
Crude oil fell on Monday, with U.S. futures losing 1.3%, as
major producers Saudi Arabia and Russia had yet to agree on
extending an output-cutting deal and with U.S.-China trade
tensions continuing to threaten demand for the commodity. O/R

(Editing by Simon Cameron-Moore)