*

Nikkei rises another 1.2%, reversing earlier losses

*

Dollar up 1.8% on yen after BOJ turned cautious on hikes

*

STOXX up 0.77%, banking index up 1.6%

*

Nasdaq futures 0.7% higher, 10-year Treasury yield up 4

bps

*

German 10- year yield up 9 bps at 2.27%,

(Updates at 0830 GMT)

By Wayne Cole and Alun John

SYDNEY/LONDON, Aug 7(Reuters) - European and Asian share

markets rose on Wednesday, led by another bounce in the Nikkei,

as the Bank of Japan unexpectedly turned cautious on rate hikes

amidst market volatility, inducing a sharp fall in the yen.

Europe's broad Stoxx 600 index rose 0.8% in early

trading, and Nasdaq futures were up 0.9%, having edged

lower earlier in the day on a 12% dive in AI darling Super Micro

Computer ( SMCI ) after it missed earnings estimates.

The Nikkei's 1.2% rise followed Tuesday's 10% rally,

suggesting investors were finding their footing after the recent

market rout. The index slumped 13% on Monday.

Sentiment had looked a little shaky early in Asia, but Bank

of Japan (BOJ) Deputy Governor Shinichi Uchida said in a speech

to business leaders the central bank will not raise interest

rates when financial markets are unstable, boosting risk assets.

The dollar jumped 1.8% to 146.84 yen and away from

the 141.675 trough hit on Monday, though it remains far below

its July peak of 161.96.

The Japanese currency is very closely watched at present

because its rapid appreciation has been blamed, in part, for the

turbulence across global markets, as its rally forced investors

to unwind carry trades in which they had borrowed cheaply in yen

to invest in higher performing assets elsewhere.

And the sense is building across investors and analysts that

the swings in markets, which reached their peak on Monday when

global share benchmarks plunged, do not prefigure more sustained

moves.

"I think you need to look at what didn't happen on Monday to

get a sense of where this fits relative to other big periods of

volatility, ... in other crises you'd see the market for

interbank funding get a lot tighter, and that didn't happen,

gold didn't perform, and commodities didn't collapse," said Tim

Graf, head of macro strategy for Europe at State Street Global

Markets.

"For me this was a very extreme position washout taking

place against the backdrop of lightly staffed trading desks and

low liquidity, but it was nothing worse than that."

"From here I think we start to reverse some of those moves

though not in full, I don't think you're going to see dollar/yen

back at the highs at which it was."

In Europe, banking stocks, which have taken a bruising in

recent days, were among the top gainers, up 1.6%, and

Novo Nordisk, Europe's largest company by market cap,

caught the eye falling 3.3% after reporting weaker-than-expected

second quarter profits.

Earlier in the day, MSCI's broadest index of Asia-Pacific

shares outside Japan jumped 1.8%.

With safe-haven in less demand, government bond yields rose.

U.S. 10-year yields rose 5 basis points to 3.935%,

and well off Monday's low of 3.667%, and the yield on the German

10 year Bund rose 9 bps to 2.275%, now nearly 20 bps of Friday's

low.

Two-year Treasury yields climbed back to 4.028%,

from a deep trough of 3.654%, as markets scaled back wagers on

an intra-meeting emergency rate cut from the Federal Reserve.

Futures now imply 105 basis points of easing this year,

compared with 125 basis points at one stage during Monday's

turmoil, while a 50-basis-point cut in September was seen as a

73% chance.

Fears of an imminent U.S. recession had also faded a little

as the run of economic data still pointed to solid economic

growth in the current quarter.

The Atlanta Fed's much-watched GDPNow estimate is that gross

domestic product is running at an annual pace of 2.9%.

In commodity markets, gold prices also turned higher, up

0.1% at $2,391.00 an ounce and short of last week's

$2,477 top.

Oil prices remained volatile as concerns about waning global

demand warred with the risk of supply disruptions in the Middle

East.

Brent rose 0.4% to $76.83 per barrel, while U.S.

crude was also up 0.5% to $73.58 a barrel.