* Asian stock markets mostly lower Monday in thin trade
* U.S. dollar shade firmer into the G8 meeting
* Bond markets brace for $73 bln in U.S. Treasury supply
By Wayne Cole
SYDNEY, July 6 (Reuters) - Markets got off to a hesitant
start Monday as investor doubts on the staying power of a
global recovery kept Asian stocks soggy and currencies subdued
ahead of a much-expanded Group of Eight meeting this week.
Japan's Nikkei <> slipped 1.58 percent to 9,661.27, while
the MSCI index of Asia ex-Japan eased 1.1 percent to 319.61
<.MIAPJ0000PUS>.
The air of caution kept the U.S. dollar and bonds supported
as safe-havens, while pressuring commodity prices. Crude oil
<0#CL:> futures were down at five-weeks lows of $65.00 a
barrel.
Investors were still smarting from last week's dismal U.S.
payrolls report which put a question mark over the recovery
there, and thus across the globe.
"The payrolls result doesn't spell the end of the global
sharemarket recovery," said Craig James, chief economist at
CommSec in Sydney, noting that forward-looking indicators were
more encouraging.
One such should be the ISM reading of the giant U.S.
services sector due later Monday which is expected to show a
rise to 46.0 in June, from 44.0 the month before [].
"But what the payrolls result does signify is that the U.S.
economic recovery will be U-shaped, and very likely to be a
very flat U," said James.
Stock bulls had been hoping for something more "V"-shaped
and the disappointment was clear in Thursday's 2.9 percent drop
in the S&P 500. Having skipped a session on Friday for the
Independence Day holiday, S&P 500 stock futures <SPc1> were off
0.86 percent in Asia at 885.90.
That implied the cash index was perilously close to
breaking major chart support of a head and shoulders pattern.
"The "neckline" of this pattern comes in at 886 and this is
also very close to the much-watched 200-day moving average,"
noted analysts at UBS in a note. "A break and close through
these levels would be bearish for stocks and bullish for our
fond leanings toward Treasuries."
G8 TALKS DOLLARS
Investors were also wary ahead of the Group of Eight summit
in L'Aquila, Italy on July 8-10, which has been expanded to
include China and a host of developing nations.
China last week floated the idea of discussing the U.S.
dollar's place as the sole international reserve currency,
causing a brief dip in the currency.
The G8 pushed back, however, with a source telling Reuters
there was no appetite for such a momentous change.
"There is pretty broad consensus with the G8 that this is
not the time to experiment with reserve currencies, however
attractive it might seem," the source said.
China also seemed keen to reassure Washington.
Speaking to reporters in Rome on Sunday, Chinese Vice
Foreign Minister He Yafei said: "The U.S. dollar is still the
most important and major reserve currency of the day, and we
believe that that situation will continue for many years to
come."
That vote of confidence helped the U.S. dollar inch higher in
very thin Asian trade on Monday <.DXY>. The euro eased to
$0.1.3976 <EUR=>, from $1.4000 late in Europe on Friday, while
the dollar held firm at 1.0865 Swiss francs <CHF=> in the wake
of last week's franc-selling intervention by the Swiss central
bank.
For bond markets, supply will again loom large this week as
the U.S. Treasury tests investor appetite with $73 billion in
three-, 10- and 30-year paper.
The last batch of Treasury auctions drew surprisingly
strong demand, crucially from foreign central banks who now
hold almost $2 trillion of U.S. government debt.
However, traditionally central banks have been less keen on
debt of 10-years or more and markets will be anxious in case
demand at any of the tenders falls short of expectations.
Yields on 10-year notes were little changed from Thursday at
3.49 percent. <US10YT=RR>
(Editing by Jan Dahinten)
