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Asian stock markets : https://tmsnrt.rs/2zpUAr4

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Euro down a fraction as France heads for hung parliament

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Stocks underpinned by hopes for Sept Fed rate cut

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Week features U.S. CPI data, Fed Powell, corporate

earnings

(Updates prices)

By Wayne Cole

SYDNEY, July 8 (Reuters) - Asian stocks inched higher on

Monday as investors grew more confident about a September U.S.

rate cut, while the euro grappled with political uncertainty as

French elections pointed to a hung parliament.

In France, a leftist alliance unexpectedly took top spot

ahead of the far right, a major upset that was set to prevent

Marine Le Pen's National Rally (RN) from running the government.

The loss of the far right was something of a relief for

investors, though they also have concerns the left's plans could

unwind many of President Emmanuel Macron's pro-market reforms.

"It will be difficult for France to form a government and as

the most likely potential outcome is now some arrangement

between parts of the left and Macron," said Holger Schmiedling,

chief economist at Berenberg.

"This could mean some reform reversals rather than further

reforms. The outcome I would say is less bad than could have

been the case. It could have been much worse."

The single currency dipped a fraction in reaction to $1.0828

, having been as high as $1.0843 on Friday when a soft

U.S. jobs report undermined the dollar.

The euro was also down 0.25% on the Swiss franc at 0.9680

francs, but held firm on the yen at 174.00

. The dollar stood at 160.70 yen, just off

its recent top of 161.86.

EUROSTOXX 50 futures and FTSE futures both

edged 0.1% higher. French 10-year bond futures dipped

23 ticks, or a modest 0.21%.

Equities were supported by hopes that a U.S. policy easing

was getting closer. MSCI's broadest index of Asia-Pacific shares

outside Japan was up 0.1%, after reaching a

two-year top last week.

Japan's Nikkei held steady near record highs.

Chinese blue-chip index eased 0.6%, while bond yields

rose as the central bank launched new money market operations.

S&P 500 futures and Nasdaq futures were both

nearly flat. Earnings season kicks off later this week when

Citigroup ( C/PN ), JP Morgan and Well Fargo all

report.

Investors took Friday's jobs report as adding to the case

for a September rate cut from the Federal Reserve, with futures

now implying a 77% chance of a move.

Markets also have 53 basis points of easing priced in for

this year, up from around 40 basis points a month ago.

"Three-month payroll growth fell sharply to +177k from +249k

as previously reported, driven by 111k of downward revisions,"

wrote analysts at Goldman Sachs.

"We continue to expect the FOMC to deliver its first cut in

September, followed by quarterly cuts to a terminal rate of

3.25-3.5%."

Treasuries rallied on the report, with 10-year yields

down at 4.30%, having been as high as 4.4930% early

last week.

Fed Chair Jerome Powell will have a chance to offer his

outlook when he appears before Congress on Tuesday and

Wednesday, while several other Fed officials are speaking this

week.

The main economic event will be the U.S. consumer price

report on Thursday, where headline inflation is expected to slow

to 3.1%, from 3.3%, with the core steady at 3.4%.

German inflation data are out the same day, while China

releases consumer prices and trade figures this week.

In commodity markets, gold held near one-month highs

at $2,385 an ounce.

Oil prices slipped as the market waited to see what impact

Hurricane Beryl might have on supplies from the Gulf of Mexico.

Brent eased 14 cents to $86.40 a barrel, while U.S.

crude fell 29 cents to $82.87 per barrel.