* Euro STOXX 600 up 0.9%; France's CAC up 1.5%
* European shares head for 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
(Updates prices throughout; adds investment officer comment)
By Tom Wilson
LONDON, June 7 (Reuters) - European shares climbed on Friday
as hopes that central banks would loosen policy offset trade
friction and the threat of global recession, putting them on
track for their best week in two months.
The Euro STOXX 600 .STOXX was up 0.9% as France's main
index .FCHI outperformed, setting European stocks on course
for their biggest weekly gain since early April. Oil stocks
.SXEP led the gains as crude jumped more than 2%.
Wall Street futures signalled a positive opening for U.S.
markets, too.
Investors around the globe are focused on the timing of an
interest rate cut by the U.S. Federal Reserve. Markets have
fully priced in a cut at the Fed's July 31 meeting and two more
by mid-2020. Some expect three cuts by the end of this year.
But a cut is not guaranteed. And the potential for central
banks to disappoint markets was highlighted on Thursday, when
euro zone stocks .STOXXE wilted 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 a more dovish at the Fed 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 those 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 to signs of a downturn. 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 seeped in after poor numbers on private hiring released
earlier in the week.
Any move from the Fed 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.
Edward Park, deputy chief investment officer at Brooks
Macdonald, said central banks have appeared sanguine at how
markets have priced in expectations for looser policy, which in
turn has boosted optimism.
"The fact central banks seem willing to let markets price in
a lot more dovish expectations has really helped sentiment," he
said.
Asia had earlier enjoyed an upbeat day. Indexes in Japan
.N225 , Australia .AXJO and South Korea .KS11 all gained
between 0.4% and 0.8 %, though bourses in Chinese and Hong Kong
were closed for a public holiday.
MSCI world equity index .MIWD00000PUS , which tracks shares
in 47 countries, edged up 0.2%.
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 0.06% on the day and a gain of 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/