(There will be no Asia Morning Bid on Friday July 5)

By Jamie McGeever

July 4 (Reuters) - A look at the day ahead in Asian

markets.

World and U.S. stocks at record highs, a UK general election and

Japanese asset prices stretched to historical levels - there's a

lot for investors in Asia to chew over on Thursday even though

liquidity will be thinned out by the July 4 U.S. holiday.

Indeed, markets in Asia may be more vulnerable to higher

volatility and outsized moves precisely because trading volumes

will be much lighter than usual.

The global backdrop to the Asian open on Thursday, however,

looks positive after stocks rose broadly on Wednesday, the

dollar weakened and Treasury yields fell - a classic collective

market-friendly loosening of financial conditions.

The minutes of the Fed's June 11 to 12 policy meeting released

on Wednesday echoed remarks from Fed Chair Jerome Powell this

week that price pressures are cooling. Good news.

More ominously, however, the "vast majority of participants"

think U.S. economic activity is cooling too, and this was backed

up by disappointing service sector data and another downward

revision to the Atlanta Fed's GDP growth tracker.

Treasury yields tumbled for a second day - wiping out the

Donald Trump and French election-fueled spike on Monday - paving

the way for another leap to another high for the S&P 500 and

Nasdaq.

Currency traders will be extra vigilant for sharp moves in

the yen and intervention from Japan to prevent its depreciation

from snow-balling, especially with U.S. markets closed.

The yen hit a fresh 38-year low around 162.00 per dollar on

Wednesday. As yet, Tokyo has not showed its hand, and perhaps it

won't - the yen's decline seems reasonably orderly, and yen

volatility across the curve is relatively subdued.

But it's worth remembering that Tokyo's last two yen-buying

forays into the market on April 29 and May 1 were carried out in

illiquid points in the global trading day or holiday-thinned

trading. Traders will be on their guard.

Not only is the yen selling off consistently, so too are

Japanese bonds. The 10-year JGB yield on Wednesday hit 1.10% and

the spread over the two-year JGB yield widened to 75 basis

points.

That's the yen at a 38-year low, the 10-year bond yield

around its highest in 13 years, and the yield curve rapidly

steepening. Plus, the Nikkei is within a whisker of breaking

March's record high.

These are big levels and big moves for Japanese assets. The

potential for some sort of pullback must surely be rising.

Thursday's economic calendar is light, with only Hong Kong

PMI and Australian trade on tap. Friday's calendar is a lot

busier, with inflation from Taiwan, Thailand and the

Philippines, current account data from South Korea, retail sales

figures from Singapore and household spending numbers from Japan

all scheduled for release.

Here are key developments that could provide more direction

to markets on Thursday:

- Hong Kong PMI (June)

- Australia trade (May)

- Thai central bank chief Sethaput Suthiwartnarueput speaks