GLOBAL MARKETS-China reserves cut extends risk rally before U.S. jobs data

* European stock markets flat or lower in early trade
* MSCI Asia-Pacific index up 0.4%, Nikkei gains 0.4%
* U.S. jobs report in focus as risk sentiment improves
* Safe-haven government bonds, yen on the defensive
* Emerging-market stocks and FX index have best week since
June
* Second week of falls for gold

By Marc Jones
LONDON, Sept 6 (Reuters) - Stimulus from China capped a
strong week for global share markets on Friday, while bond
buyers and dollar dealers were waiting for U.S. jobs data after
their first significant selloffs in months.
After a roller-coaster week dominated by UK and Italian
political drama, Washington and Beijing trade talk, global
monetary stimulus and Argentina's imposing capital controls,
calm looked to have returned. Then Beijing cut in.
As Chinese markets were closing, the country's central bank
said it was slashing the amount of cash that banks must hold as
reserves for the third time this year. That released a total of
900 billion yuan ($126.35 billion) to shore up the slowing
economy.
Europe's pan-region Stoxx 600 STOXX , London FTSE .FTSE ,
Paris CAC 40 .FCHI and DAX in Frankfurt .GDAXI were all
higher, after rising to their highest in more than month on
Thursday. .EU
Euro zone bond yields steadied after their worst one-day
selloff in more than a year GVD/EUR . The euro EUR= and pound
GBP= saw weekly gains after the biggest drop for the dollar in
a month. /FRX
"It feels to me like the air is coming out of it a bit,"
Societe Generale strategist Kit Juckes said, referring to the
recent surge in volatility. "So we will see what we get from the
payrolls."
The closely watched U.S. non-farm payrolls report due at
1230 GMT was expected to show 158,000 jobs were added in August
and the unemployment rate was unchanged at 3.7%.
Surveys on Thursday had suggested the U.S. may be in better
shape than investors have been fearing. Services activity
accelerated in August and private employers increased hiring
more than expected.
Despite the reassuring signs, bond markets still expect the
Federal Reserve to cut U.S interest rates this month and a total
of 55 basis points of cuts by the end of the year.
Overnight, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS added 0.6%, giving it a 2.4%
weekly gain, its best week since mid-June.
United States and China agreed to hold high-level talks
early in October, raising hopes for their long trade conflict
would be resolved. The Shanghai Composite Index .SSEC ended up 0.5% and Hong
Kong's Hang Seng .HSI rose 0.6%, even though the rating agency
Fitch downgraded the city's credit rating after months of
unrest. Australian stocks .AXJO gained 0.5%, South Korea's KOSPI
.KS11 climbed 0.2% and Japan's Nikkei .N225 advanced 0.5%.
On Thursday, Wall Street's Dow .DJI added 1.4%, the S&P 500
.SPX climbed 1.3% and Nasdaq .IXIC rose 1.75%.
"The strong U.S. data are the main part of the latest turn
in markets as they are key factors impacting equities and U.S.
yields, therefore determining how long this 'risk on' phase will
last," said Junichi Ishikawa, senior FX strategist at IG
Securities in Tokyo.
The August payrolls report "will get more attention than
usual as it could further fuel the risk-on phase, which in turn
would boost the dollar," Ishikawa said.
Despite its broader decline, the dollar stood at 107.04 yen
JPY= after climbing to a one-month high of 107.235 overnight.
The pound GBP=D3 rose to $1.23 from the near-six-week peak
of $1.2353 it reached after Britain's parliament moved to block
a UK departure from the European Union without a transitional
agreement. It had fallen to a three-year low of $1.1959 midweek
amid threats of a no-deal Brexit.
The euro was steady at $1.1039 EUR= after rising 0.5%
overnight, when it was helped by the Brexit drama and the
sagging dollar.
U.S. Treasuries fell in price and their yields rebounded
from multi-year lows as investors moved out of safe assets into
equities. US/
The 10-year Treasury yield US10YT=RR was 1.536%, up from a
three-year low of 1.428% in midweek, when soft economic data and
Sino-U.S. trade worries stoked global recession concerns.
"The recent panic in markets was excessive. And if a
sustained reversal of fragile sentiment gets under way, U.S.
equities will test fresh record highs and a corresponding drop
in bond prices will present an good bargain-hunting
opportunity," said Eiichiro Tani, chief strategist at Daiwa
Securities.
In commodities markets, Brent oil futures LCOc1 were
little changed at $60.97 per barrel. Brent had climbed to a
one-month peak of $62.40 per barrel on Thursday after data
showed U.S. crude stockpiles decline and the news about
U.S.-China trade talks.