*

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

*

Factory activity up in China, Japan and S.Korea

*

ECB seen easing on Thurs, Canada may cut on Wed

*

Focus on US ISM surveys, May payrolls reports

*

Oil prices see-saw as OPEC+ extends most output cuts

(Updates prices)

By Wayne Cole

SYDNEY, June 3 (Reuters) - Asian share markets rallied

on Monday, as investors looked forward to an interest rate cut

in Europe and quite possibly Canada as the next step in global

policy easing, though sticky inflation threatens to make the

process a drawn out affair.

There was also better news from China as the private Caixin

survey showed a pick-up in its main factory index to a two-year

top of 51.7 in May, from 51.4 in April.

Japan's factory activity expanded for the first time in a

year in May, while activity in South Korea grew at the fastest

pace in two years.

All of which helped MSCI's broadest index of Asia-Pacific

shares outside Japan bounce 1.4%, having slid

2.5% last week. Chinese blue chips added 0.3%.

Japan's Nikkei rose 1.1%, after rebounding from

one-month lows on Friday, while South Korea gained 1.8%.

Meanwhile, EUROSTOXX 50 futures climbed 1.0% and

FTSE futures 0.8%, as the risk-on mood spread.

South Korean President Yoon Suk Yeol flagged the possibility

of a vast amount of oil and gas reserves in the sea off the

country's east coast.

Indian markets hit record highs on wagers Prime

Minister Narendra Modi will expand his alliance's majority in

parliament when election results are released on Tuesday,

leading to greater economic reforms.

Month-end flows saw Wall Street stage a late rally on Friday

and left the Nasdaq up almost 7% for May. Early on Monday, S&P

500 futures were up 0.2%, with Nasdaq futures

adding 0.3%.

The prospect of lower borrowing costs globally has been

generally positive for equities.

ECB TO PIP FED

The European Central Bank (ECB) is considered almost certain

to trim rates by a quarter point to 3.75% on Thursday, the first

time in history it would have eased ahead of the U.S. Federal

Reserve.

However, a surprisingly high reading for euro zone inflation

out last week blunted hopes for a rapid round of reductions and

markets have 57 basis points of easing priced in for this year.

"The probability of back-to-back cuts now appears very low,

putting the focus for a second move on September," said Bruce

Kasman, head of economic research at JPMorgan.

"We suspect President Christine Lagarde will signal that the

direction of rates is downward next week, but the policy

statement will emphasize that future moves are data-dependent,

and there is no pre-commitment to a particular rate path."

Markets also imply around an 80% chance the Bank of Canada

will cut at its meeting on Wednesday and 59 basis points of

easing this year, though analysts are hopeful the easing will be

even deeper.

Investors are a lot less dovish on the Fed, seeing little

prospect of a move until September and even that is far from a

done deal.

The outlook could change this week given data due includes

key surveys on services and manufacturing, and the May payrolls

report where unemployment is seen holding at 3.9% as 190,000 net

new jobs are created.

In forex markets, the Japanese yen remains the weakest of

the majors, though the government is clearly prepared to spend

big to slow its slide. Data out last week showed Tokyo spent

9.788 trillion yen ($62.27 billion) on currency intervention

between April 26 and May 29.

The dollar firmed to 157.41 yen, just short of

last week's peak at 157.715. The euro held firm at $1.0855

, still benefiting from the EU inflation report, but

faces resistance at $1.0895.

Gold was a shade softer at $2,322 an ounce, having

now rallied for four months in a row helped in part by buying

from central banks and China.

Oil prices see-sawed after OPEC+ agreed on Sunday to extend

most of its oil output cuts into 2025, though some cuts will

start to be unwound from October 2024 onwards.

Brent eased 10 cents to $81.01 a barrel, while U.S.

crude lost 6 cents to $76.93 per barrel.

($1 = 157.1900 yen)