* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Markets nervous before non-farm payrolls
* U.S. short-term Treasury yields continue to fall
* Central banks struggling with response to trade friction
* Asia ex-Japan stocks headed for third weekly decline
By Stanley White
TOKYO, Oct 4 (Reuters) - Asian stocks edged up on Friday,
thanks to gains on Wall Street, but signs of widening cracks in
the global economy curbed risk appetite as markets looked to a
key U.S. job report that could determine whether the Federal
Reserve cuts rates further.
Investors have been caught out by a set of weak U.S. data
this week, including surveys on services and manufacturing
sectors, deepening fears the Sino-U.S. trade war is starting to
hurt growth in the world's biggest economy.
"We'll probably see a bounce in Asian shares, but then
nervousness will creep into the markets as the day progresses,"
said Shane Oliver, head of investment strategy and chief
economist at AMP Capital Investors in Sydney.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.4%. Japan's Nikkei stock index .N225
rose 0.22%, and Australian shares .AXJO rose 0.54%.
The pan-region Euro Stoxx 50 futures STXEc1 were up 0.44%,
German DAX futures FDXc1 0.33% higher and FTSE futures FFIc1
advanced 0.69%.
U.S. stock futures ESc1 tacked on 0.1% on Friday,
following a 0.80% increase in the S&P 500 on Wall Street
overnight on hopes that future Fed rate cuts will support
corporate profits. "The bounce on Wall Street is not a definitive sign. It's
actually pessimistic for stocks that two-year yields are falling
this much. It shows the bond market hasn't gotten on board with
this positive growth story," AMP's Oliver said.
That sentiment was underscored by a frail performance for
world stocks in recent weeks, hurt by political uncertainty in
the United Stated and Hong Kong, geopolitical tensions in the
Middle East, Brexit and a drumroll of weak global data.
In Asia, excluding Japan, equities were on course for the
third weekly decline, their worst performance since four weeks
of declines ended Aug. 16.
Japan's Nikkei was down 2.3% for the week, on course for its
biggest weekly decline since Aug. 2, pressured by worries about
trade friction and a resurgent yen.
Hong Kong shares .HSI were down 0.4% and though they are
on track for a 0.17% weekly gain, sentiment is fragile as the
territory's government mulls emergency laws to contain months of
often violent protest against China's rule of the former British
colony. U.S. Treasury prices fell slightly but two-year yields
remained near the lowest in two years due to growing signs the
United States is feeling an economic chill from its trade war
with China.
The dollar traded near a one-month low versus the yen, while
it was stuck near a one-week trough versus the euro as traders
increased bets that the Fed will have to cut rates further to
keep growth in the U.S. economy on track.
Data due later on Friday are forecast to show the U.S.
economy added 145,000 new jobs in September, more than an
increase of 130,000 in the previous month.
However, some traders are braced for a disappointing result
after the surprisingly soft data earlier this week on U.S.
manufacturing, job creation, and the services sector.
The two-year yield US2YT=RR , which tracks expectations for
U.S. monetary policy, rose slightly to 1.3956% in Asia but was
still close to a two-year low of 1.3680%.
Traders see a 85.2% chance the Fed will cut rates by 25
basis points to 1.75%-2.00% in October, up from 39.6% on Monday,
according to CME Group's FedWatch tool. FEDWATCH
The Fed has already cut rates twice this year as
policymakers try to limit the damage caused by the bruising
Sino-U.S. trade war.
The dollar edged down to 106.81 yen JPY=EBS , close to a
one-month low of 106.48 yen reached on Thursday. The euro
EUR=EBS was a shade higher at $1.0974, near a one-week high.
For the week, the dollar was down 1.04% versus the yen and
off 0.3% against the common currency.
U.S. crude CLc1 rose 0.63% to $52.78 a barrel, while Brent
crude LCOc1 rose 0.54% to $58.02 per barrel.
U.S. Oil futures on Thursday touched the lowest in nearly
two months as the weak U.S. economic data heightened concerns
that excess supplies will push prices lower.
For the week, U.S. crude futures were on course for a 5.6%
decline, which would be the worst performance since July 19.
Spot gold XAU= , a safe-haven asset that investors often
buy during times of heightened risk, rose 0.2% to $1,507.77 per
ounce, on course for a 0.75% weekly gain. GOL/
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Historical monthly performance of U.S. stocks png https://tmsnrt.rs/2onTJUS
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(Editing by Shri Navaratnam)