* MSCI Asia-Pacific index up 0.6%, Nikkei edges up 0.2%
* European stock futures gain in early trade
* Benchmark U.S. yields hover near 3-year lows
* Sterling regains some ground after Johnson setback in
parliament
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Shinichi Saoshiro
TOKYO, Sept 4 (Reuters) - Stocks followed a firmer Chinese
lead on Wednesday after a report showed growth in the country's
service sector accelerating despite broader economic headwinds,
while the pound halted its decline on hopes a no-deal Brexit may
yet be averted.
In early European trade the pan-region Euro Stoxx 50 futures
STXEc1 rose 0.75%, Germany's DAX futures FDXc1 gained 0.75%
and Britain's FTSE futures FFIc1 advanced 0.5%.
The Shanghai Composite Index .SSEC added 0.3% while the
blue-chip CSI300 index .CSI300 gained 0.25% after activity in
China's services sector expanded at the fastest pace in three
months in August, according to a business survey. MSCI's index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS snapped two days of losses and gained 0.6%.
South Korea's KOSPI .KS11 advanced 0.4% and Japan's Nikkei
.N225 added 0.2%.
Expectations that global bond yields will stay lower for
longer amid a central bank shift to more accommodative policy
also supported equities.
"Lower yields could prompt a recovery in investments, and
this is a factor shoring up equities," said Junichi Makino,
chief economist at SMBC Nikko Securities, regarding market moves
following the release of Tuesday's poor U.S. manufacturing
activity data.
The U.S. manufacturing sector contracted in August for the
first time since 2016 amid worries about a weakening global
economy and rising trade tensions between China and the United
States, the Institute for Supply Management's (ISM) report on
Tuesday showed. In light of the weak ISM reading the 10-year U.S. Treasury
US10YT=RR stooped to 1.429% on Tuesday, its lowest since July
2016. It pulled back slightly from the trough and last yielded
1.470%.
"As the decline in U.S. yields show, the markets will be
urging the Fed on to do more even though a September rate cut is
already priced in," said Masahiro Ichikawa, senior strategist at
Sumitomo Mitsui DS Asset Management.
According to CME's FedWatch tool, traders have almost fully
priced in a 25 basis point interest rate cut at the Fed's Sept.
17-18 policy meeting while expectations for another 25 bp
reduction being implemented at the October meeting have risen to
61% from 53% over the past month.
POUND FINDS SUPPORT
Sterling was last up 0.2% at $1.2107 GBP=D3 after falling
on Tuesday to $1.1959, the lowest level since October 2016.
The pound's bounce came after a British cross-party alliance
defeated Prime Minister Boris Johnson in an effort to block a
"no-deal" Brexit, leading the premier to push for a snap
election. FRX/
The dollar index .DXY against a basket of six major
currencies stood at 98.933 after rising overnight to 99.37, its
highest level since May 2017, having lost some ground in the
wake of Tuesday's poor ISM reading.
The euro was steady at $1.0975 EUR= after sliding to a
28-month low of $1.0926 overnight as investors braced for a
potential interest rate cut by the European Central Bank next
week.
The Australian dollar hovered near a one-week high of
$0.6783 AUD=D4 as traders pared expectations for an October
rate cut after Australia's second quarter economic growth
matched expectations. Still, Australia's growth was the slowest in a decade,
keeping alive the prospect of central bank easing and limiting
the Aussie's gains.
U.S. crude oil futures CLc1 rose 0.5% to $54.20 per
barrel, trimming some of the previous day's large losses. The
contracts had shed more than 2% on Tuesday after the weak U.S.
ISM data raised concerns about a weakening global economy. O/R
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S&P 500, U.S. ISM https://tmsnrt.rs/2zNhzM3
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(Editing by Richard Borsuk and Sam Holmes)