*

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

*

Nikkei futures, yen steady after Japan elections

*

Wall St futures firm before earnings blitz

*

Euro underpinned as ECB seen on hold

(Adds China, European stocks)

By Wayne Cole

SYDNEY, July 21 (Reuters) - Asian shares and the yen

held their ground on Monday as Japanese elections proved bad

for the government but no worse than already priced in, while

Wall Street futures braced for earnings from the first of the

tech giants.

Investors were also hoping for some progress in trade talks

ahead of President Donald Trump's August 1 tariff deadline, with

U.S. Commerce Secretary Howard Lutnick still confident a deal

could be reached with the European Union.

There were reports Trump and Chinese leader Xi Jinping were

closer to arranging a meeting, though likely not until October

at the earliest. European Commission President Ursula von der

Leyen has stolen a march and will meet with Xi on Thursday.

In Japan, the ruling coalition lost control of the upper

house in an election on Sunday, further weakening Prime Minister

Shigeru Ishiba's grip on power as a tariff deadline looms.

Ishiba expressed his intention to stay in the position,

which along with a market holiday, limited the reaction and the

yen was 0.4% firmer at 148.29 to the dollar.

"Ishiba will try to govern with support from some within the

opposition, but this likely means a looser fiscal policy and is

not good news for bond yields," said Rodrigo Catril, a senior FX

strategist at NAB.

"History also suggests that domestic political uncertainty

tends to keep the BOJ on the sidelines, so the prospect of rate

hikes is now set to be delayed for a little bit longer."

The Bank of Japan still has a bias to raise rates further

but markets are pricing little chance of a move until the end of

October.

While the Nikkei was shut, futures traded at 39,820

and in line with the cash close of 39,819.

MSCI's broadest index of Asia-Pacific shares outside Japan

eased 0.1%, while South Korean stocks

added 0.5%.

Chinese blue chips firmed 0.3% as Beijing kept

interest rates unchanged as widely expected.

MEGA CAPS KICK OFF

EUROSTOXX 50 futures and DAX futures both

dipped 0.3%, while FTSE futures lost 0.1%.

S&P 500 futures and Nasdaq futures both edged

up 0.1%, and are already around record highs in anticipation of

more solid earnings reports.

A host of companies reporting this week include Alphabet

and Tesla, along with IBM ( IBM ).

Investors also expect upbeat news for defence groups RTX

, Lockheed Martin ( LMT ) and General Dynamics ( GD ).

Ramped up government spending across the globe has seen the S&P

500 aerospace and defence sector rise 30% this year.

In bond markets, U.S. Treasury futures held steady

having dipped late last week after Federal Reserve Governor

Christopher Waller repeated his call for a rate cut this month.

Most of his colleagues, including Chair Jerome Powell, have

argued a pause is warranted to judge the true inflationary

impact of tariffs and markets imply almost no chance of a move

in July. A September cut is put at 61%, rising to 80% for

October.

Powell's reticence on rates has drawn the ire of Trump who

threatened to fire the Fed chief, before backing down. The

spectre of a potential political appointee who would seek to

ease policy sharply has investors on edge.

The European Central Bank meets this week and is expected to

hold its rates steady at 2.0% following a string of cuts.

"The press conference will likely keep highlighting

uncertainty and need to wait for tariff negotiations to conclude

before deciding the next step," said analysts at TD Securities

in a note. "Similarly, its 'meeting-by-meeting' language would

be retained in the release."

The euro was unchanged at $1.1622 in early

trading, having dipped 0.5% last week and away from its recent

near-four-year top of $1.1830. The dollar index was a fraction

firmer at 98.465.

In commodity markets, gold was little changed at $3,348 an

ounce with all the recent action in platinum which

last week hit its highest since August 2014.

Oil prices were caught between the prospect of increased

supply from OPEC+ and the risk European Union sanctions against

Russia for its war in Ukraine could curb its exports.

Brent edged up 0.1% to $69.36 a barrel, while U.S.

crude added 0.2% to $67.45 per barrel.

(Editing by Sam Holmes and Shri Navaratnam)