Aug 5 (Reuters) - A look at the day ahead in Asian

markets.

Asian markets on Monday get their first chance to react to the

extraordinary market moves on Friday that saw stocks and bond

yields tumble, and volatility and rate cut expectations soar

following an unexpectedly soft U.S. employment report.

That 'risk off' sentiment and momentum is sure to spill over

into Asia, which was already wobbling last week after the Bank

of Japan's hawkish policy tilt, yet more sluggish Chinese

economic data and some weak U.S. tech earnings.

The MSCI Asia ex-Japan stock index slumped 2.5% on Friday,

its biggest fall in over two years, and Japan's Nikkei 225 index

tanked 5.8% for its biggest fall since March 2020. Japan's

broader Topix's 6.1% slide marked its worst day since 2016.

Given Friday's U.S. payrolls-fueled selling on Wall Street,

a sharp selloff in Asia early Monday is likely. Friday's market

gyrations may prove to be excessive, but they are worth noting.

The two-year U.S. Treasury yield plunged 30 basis points,

its steepest one-day fall since the U.S. regional banking shock

of March last year. Its weekly fall of 50 bps is in line with

those seen in the COVID-19, Lehman, 9/11 and Black Monday

crises.

In equities, the VIX volatility index at one point on Friday

had doubled from the previous day.

The stampede to unwind carry trades helped push the yen up

nearly 5% against the dollar last week - the Japanese currency

has only had three better weeks in the past 25 years.

Plunging U.S. bond yields may ease financial conditions -

Goldman Sachs's emerging market financial conditions index on

Friday fell to its lowest since March - but they're loosening

for 'bad' reasons, namely recession fears.

Hopes for the much-vaunted U.S. economic 'soft landing'

appear to have completely evaporated, replaced by fears of a

'hard landing'.

Traders are now attaching a 70% chance to the Fed cutting

rates by half a percentage point next month, and are pricing in

115 basis points of easing by the end of the year and over 200

bps by next June.

High yield corporate debt markets will be worth watching

closely. This is where the first signs of a 'credit event'

usually appear, heralding wider retrenchment across businesses,

rising unemployment and ultimately recession.

High yield U.S. debt spreads over Treasuries jumped on

Friday to the widest of the year of more than 370 bps, but that

was mostly due to the slump in government bond yields rather

than investors dumping corporate debt. If that dynamic changes,

hold onto your hats.

Monday's economic and events calendar in Asia includes

service sector purchasing managers index data from across the

continent including China, inflation figures from Thailand, GDP

numbers from Indonesia and some Japanese earnings.

Here are key developments that could provide more direction

to markets on Monday:

- China 'unofficial' services PMI (July)

- Thailand consumer price inflation (July)

- Indonesia GDP (Q2)