* Asian stock markets mostly lower Monday in thin trade
* Yen gets safe-haven bid before G8 meeting, oil slips
* Bond markets brace for $73 bln in U.S. Treasury supply
(Updates prices)
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.
With risk out of favour for the moment, Japan's Nikkei <>
fell 1.38 percent and the MSCI index of Asia ex-Japan eased
0.41 percent <.MIAPJ0000PUS>.
Indian shares <> fell more than 2 percent and bonds
yields rose as India's finance minister outlined a stimulative
budget that proposes a bigger-than-expected deficit.
[].
Futures prices <STXEc1> also pointed to a soft start for
Europe.
The air of caution kept safe-havens like the yen and
sovereign bonds supported, while pressuring commodity prices
and leveraged plays. Crude oil futures <0#CL:> were down near
five-weeks lows below $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 indicator should be the ISM reading of the giant
U.S. services sector due later on 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 0.78 percent in
Asia at 886.30.
That implied the cash index was perilously close to
breaking major chart support.
"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 on
the euro <EUR=> on Monday, though the yen made ground across
the board <JPY=>.
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
3.50 percent. <US10YT=RR>
(Editing by Neil Fullick)
