*

Trump exempts some automakers from Canada, Mexico tariffs

for 1

month

*

Asia stocks track Wall Street higher, Hong Kong stocks

surge

*

German bond market selloff widens, JGB yields at

multi-year high

*

Euro at four-month high ahead of ECB policy decision

(Updates to Asia mid-afternoon)

By Ankur Banerjee

SINGAPORE, March 6 (Reuters) - Asian stocks rose on

Thursday as investors held out hope that trade tensions could

ease after U.S. President Donald Trump exempted some automakers

from tariffs for a month, while the euro stood tall ahead of the

European Central Bank's meeting.

Japanese government bonds fell sharply after German

long-dated bonds were swept up in their biggest sell-off in

decades as the parties in talks to form Germany's new government

agreed to try to loosen fiscal rules.

Japan's 10-year government bond yield, which moves inversely

to prices, hit a near 16-year high, while Australian bond yields

rose 12 basis points. The yield on benchmark U.S. 10

year Treasury notes rose 5 bps in Asian hours.

"The German news is a shock," said Mansoor Mohi-uddin, chief

economist at Bank of Singapore. "Asian government bond yields

are rising as investors realise geopolitical tensions may cause

governments across the region to also increase spending on

defence."

Much of the focus in markets remains on an escalating global

trade war after 25% tariffs on imports from Mexico and Canada

were imposed on Tuesday along with fresh duties on Chinese

goods, sparking fears about economic growth.

But on Wednesday, the White House said Trump would exempt

automakers from his 25% tariffs on Canada and Mexico for one

month as long as they complied with existing free trade rules.

That led U.S. stocks sharply higher, shoring up Asian

markets. MSCI's broadest index of Asia-Pacific shares outside

Japan was up 1.2%, while Tokyo's Nikkei

gained 0.9%.

Futures indicate European markets are set for a higher open

as well, with pan-European STOXX 50 futures up 0.7% and

Germany's DAX futures 0.3% higher.

"Obtaining any kind of reliable signal from the headlines is

almost impossible," said Chris Weston, head of research at

Pepperstone.

"One must truly feel for those businesses that need to plan

ahead - with tariff policy changing almost daily, the ability to

have any sort of confidence to make strategic decisions is

currently almost impossible - this will have implications."

China and Hong Kong shares rose on Thursday, a day after

Beijing set an ambitious economic growth target and vowed more

support for domestic consumption and the technology industry as

a trade war with the United States ratchets up.

China's blue-chip index rose 1% while Hong Kong's

Hang Seng Index surged nearly 3%, hitting its highest

level in three years. The Hang Seng is up 20% so far this year,

by far the best performing major stock market in the world.

ECB DAY

Investor focus on Thursday will be on the ECB meeting, where

it is widely expected to cut interest rates again as

policymakers contend with trade war woes and a rearmament focus

in the region.

The meeting comes a day after the euro jumped 1.5% and

German bonds were sold off as the parties in talks to form

Germany's new government agreed to create a 500 billion euro

($540.70 billion) infrastructure fund and to overhaul borrowing

rules.

German 10-year Bund futures fell 0.7% on Thursday,

indicating a likely decline in cash bond prices later. On

Wednesday, the 10-year yield, the euro zone's

benchmark, climbed more than 30 basis points, in its biggest

daily rise in roughly 28 years.

The euro rose 0.25% to $1.0815, just shy of the

four-month peak touched in early Asian hours. The single

currency is on course for a rise of more than 4% this week, its

strongest weekly performance since March 2009.

"Is it the gamechanger that switches Germany from a drag on

activity to an engine of growth? It won't be a magic bullet, but

it is definitely a step in the right direction," said Kyle

Chapman, FX markets analyst at Ballinger Group.

The dollar index, which measures the U.S. currency

against six other units, eased to 104.11, touching its lowest

level since early November.

In commodities, gold prices were steady at $2,921.39 per

ounce as traders await the U.S. non-farm payrolls report on

Friday for cues on the Federal Reserve's policy path.

Oil prices tried to catch a break after stumbling in the

previous sessions this week, undermined by a larger than

expected jump in U.S. crude stocks, OPEC+ plans to increase

output and U.S. tariffs on key oil supplies.

Brent futures hovered close to an over three-year

low touched on Wednesday.

($1 = 0.9247 euros)