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* China growth plays keep Hong Kong, Taiwan stocks
supported
* Key 10-year JGB auction goes smoothly, futures cut losses
* How stable is the U.S. recovery?
By Kevin Plumberg
HONG KONG, July 2 (Reuters) - Stocks in Hong Kong and
Taiwan rose on Thursday, bolstered by bets China's recovery
will continue, while the U.S. dollar recovered from a
three-week low against the euro ahead of the latest U.S. labour
market report.
Major European stock futures <STXEc1> were down 0.9 percent
before the jobs data, while U.S. S&P 500 futures <SPc1>
declined 0.3 percent.
The U.S. unemployment rate is forecast to rise to a 26-year
high of 9.6 percent, which would test the most die-hard bulls
on the extent of the recovery even after Wednesday's positive
manufacturing figures from China, Europe and the United States.
"Manufacturing data from the United States and other major
economies came out quite solid, but investors remain cautious
ahead of U.S. jobs data and corporate earnings," said Yoo
Soo-min, a market analyst at Hyundai Securities in Seoul.
Japanese government bond futures cut their losses after a
2.1 trillion yen ($21.7 billion) auction of 10-year bonds meant
to help Tokyo finance stimulus spending drew solid demand. That
spread relief among investors worried bond yields may head
higher in coming weeks.
Japan's Nikkei share average <> slipped 0.6 percent
but was not far from an eight-month high reached three weeks
ago.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.5 percent, with strength concentrated in
the technology and materials sectors.
Stocks in Taiwan rose 1.4 percent, outpacing the region as
investors eager to gain exposure to Chinese economic growth
prospects pushed the benchmark TAIEX index <> to a fresh
one-month high.
Valuations of technology firms in Taiwan, on a 12-month
forward price-to-earnings basis, have been coming down in the
last few months and are currently around 23 times compared with
50 times in April, according to global estimates tracker
I/B/E/S.
That has drawn investors to stocks such as mobile phone
chipmaker Mediatek <2454.TW>, which was up 1.6 percent.
Hong Kong's Hang Seng <> climbed 1.2 percent, with
shares of China Construction Bank up 2 percent <0939.HK> and
providing the biggest boost to the index on expectations the
pace of loan growth in China will remain rapid.
The U.S. dollar made up some lost ground against major
currencies after it fell on Wednesday on news China was seeking
debate on proposals for a new global reserve currency at next
week's Group of Eight meeting. []
However, dealers were cautious about taking big positions
ahead of the June U.S. employment report that is expected to
show payrolls fell 363,000.
U.S. private employers slashed a bigger-than-expected
473,000 jobs in June, according to a report from ADP Employers
Services on Wednesday, making the market wary that the
government's data may show more losses than forecast.
"The ADP number was worse than expected so now there might
be some downside risk in payrolls which makes it harder to take
large positions," said Yuki Sakasai, currency strategist at
Barclays Bank Tokyo.
The euro was trading nearly unchanged on the day at $1.4134
<EUR=>, having carved out a $1.4340 to $1.3750 range since
hitting a high for the year on June 3.
The Australian dollar was down 0.3 percent to US$0.8065
<AUD=>, weighed down after trade data showed a much
larger-than-expected shortfall of A$556 million.
The 10-year Japanese government bond futures contract
<2JGBv1> was basically flat on the day after the smooth auction
results. It had been the first time the benchmark note's
monthly sale topped 2.0 trillion yen -- psychologically a level
which debt management officials have avoided in the past to
encourage smooth market absorption when the issuance size has
been hiked.
The end of the first half of the year saw heavy buying of
JGBs, especially late maturities, narrowing the difference
between the 10-year yield and the 2-year yield by 14 basis
points in the last month.
The yield on the benchmark U.S. 10-year Treasury note was
at 3.55 percent <US10YT=RR>, roughly where it was at the end of
New York's trading day on Wednesday.
U.S. light crude for August delivery <CLc1> slipped 0.2
percent to $69.20 a barrel, but still within sight of Tuesday's
eight-month high of $73.38 a barrel.
The uncertain path of the U.S. economy as well as higher
retail fuel prices in China and India were factors that have
tempered oil's rise in the last few weeks.
(Additional reporting by Charlotte Cooper in TOKYO and
Jungyoun Park in SEOULl; Editing by Tomasz Janowski)
