* Euro STOXX 600 up 0.7%, recovering from ECB disappointment
* European shares head towards best week in two months
* Markets see central bank respite to trade war, recession
fears
* U.S. payroll data at 1430 GMT may show drop in hiring
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Wilson
LONDON, June 7 (Reuters) - European stocks gained ground on
Friday as hopes that central banks would loosen policy offset
trade friction and the threat of global recession, putting
indexes on track for their best week in two months.
The broader Euro STOXX 600 .STOXX was up 0.7% as France's
main index .FCHI outperformed, setting European stocks on
course for their best weekly gain since early April. Oil stocks
.SXEP led the gains, after slumping earlier in the week.
Wall Street futures signalled a positive opening for U.S.
markets as well.
Investors around the globe are focussing on the timing of a
rate cut by the U.S. Federal Reserve. Markets have fully priced
in a cut at its July 31 meeting and two more by mid-2020. Some
see the prospect of three cuts by the end of this year.
But a cut is not guaranteed. And the potential for market
disappointment with central banks was highlighted on Thursday,
when euro zone stocks .STOXXE fell after the European Central
Bank declined to hint it would cut rates soon.
"The fact is that market participants are already betting on
the first (Fed) cut in July, which looks a bit early in my
view," said Christophe Barraud, chief economist and strategist
at Market Securities, a brokerage in Paris.
The prospect of Fed rate cuts underscores the concern with
which central banks are assessing the global economy. Many see
trade tensions and a tilt towards protectionism as presenting
risks of recession.
U.S. President Donald Trump has threatened to impose a 5%
tariffs on all exports from Mexico unless it curbs the flow of
Central Americans heading to the United States. The
prospect of tariffs has rattled global financial markets as the
U.S.-China trade conflict rumbles on.
Trump said on Thursday he would decide after a G20 meeting
in Japan later this month whether to carry out his threat to hit
Beijing with new tariffs on at least $300 billion worth of
Chinese goods. With that escalation looming, markets are assessing how
global central banks will respond. Data that could affect any
Fed loosening are in focus, starting with U.S. non-payroll farms
data due at 1430 GMT.
Forecasts are for U.S. jobs to rise in May, though doubts
have grown after poor numbers on private hiring released earlier
in the week.
The Fed's move is widely seen as influencing how other major
central banks will act, even if the ECB and Bank of England have
less room to manoeuvre with uncertainty over Brexit still
pervasive.
"If the Fed starts its first rate cut soon, it will change
the outlook," said Market Securities' Barraud. "Global central
banks will be more accomodative until trade growth recovers."
European shares echoed an upbeat day in Asia, where indexes
in Japan .N225 , Australia .AXJO and South Korea .KS11 all
gained. Chinese and Hong Kong markets were closed for a public
holiday.
MSCI world equity index .MIWD00000PUS , which tracks shares
in 47 countries, edged up 0.16%.
DOLLAR BECALMED
In currency markets, the dollar was set for its worst week
since March before the U.S. employment data. Analysts said that
currency traders were bracing for weaker numbers, although they
added the data would be unlikely to move the dollar much,
barring major surprises.
"The data would have to surprise significantly to the
downside, based on the analysts consensus, for the markets to
act more significantly," said Thu Lan Nguyen, FX Strategist at
Commerzbank in Frankfurt.
The dollar was trading at 97.058 against a basket of six
other currencies .DXY , up about 0.3% from Wednesday's
eight-week low.
In China, central bank chief Yi Gang said there was plenty
of room for both fiscal and monetary policy easing should the
trade war with the United States escalate. The comments sent the
dollar 0.4% higher CNH= in a thin Asian market.
Brent crude futures LCOc1 were up 1.8% at $62.75 a barrel
by 0835 GMT amid signs that OPEC and other producers may extend
their supply cuts. They gained 1.7% on Thursday. For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/