GLOBAL MARKETS-Shares cautious, dollar slips as trade concerns persist

By Rae Wee

SINGAPORE, June 3 (Reuters) - Asia shares edged slightly higher on Tuesday while the dollar fell to a six-week low as erratic U.S. trade policies clouded market sentiment and investors turned defensive ahead of key developments later in the week.

U.S. President Donald Trump and Chinese leader Xi Jinping will probably speak this week, White House Press Secretary Karoline Leavitt said on Monday, days after Trump accused Beijing of violating an agreement to roll back tariffs and trade restrictions.

The call between the two leaders will be closely watched by markets, which have been roiled by tariff-induced trade tensions between the world's two largest economies that continue to simmer.

Data on Monday showed U.S. manufacturing contracted for a third straight month in May and suppliers took the longest time in nearly three years to deliver inputs amid tariffs.

"The May ISM showed tariff pressure is beginning to bite for manufacturers who are seeing slowing activity, longer lead times and declining inventories," said economists at Wells Fargo.

China's factory activity in May also shrank for the first time in eight months, a private-sector survey showed on Tuesday, indicating U.S. tariffs are starting to hurt manufacturers.

The gloomy global trade situation left U.S. futures falling in the Asian session, failing to sustain the slight gains made during the cash session on Wall Street overnight.

Nasdaq futures NQc1 and S&P 500 futures ESc1 were both down more than 0.3% each. In Europe, EUROSTOXX 50 futures STXEc1 and FTSE futures FFIc1 were up just 0.1%.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS reversed early losses to last trade 0.4% higher, while Japan's Nikkei .N225 rose 0.1%.

"Trump really does have sentiment in the palm of his hands once again," said Matt Simpson, senior market analyst at City Index.

"I suspect we'll hear about 'a really great call' or words to the effect," he said, referring to the expected call between Trump and Xi.

"But we'll need to wait for confirmation from China, who tends to take their time on these matters. Until we get concrete confirmation, price action could be shaky and vulnerable to false breaks ... we also have the June 4 deadline for 'best trade deals' from U.S. trading partners to factor in."

The Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks.

In China, mainland markets returned from an extended break on a muted note, with the CSI300 blue-chip index .CSI300 up 0.3% while the Shanghai Composite Index .SSEC gained 0.4%.

Hong Kong's Hang Seng Index .HSI jumped more than 1%, rebounding from Monday's one-month low.

PAYROLLS ON DECK

The dollar =USD fell to a six-week low against a basket of currencies early on Tuesday, ahead of Friday's U.S. nonfarm payrolls data, which will offer a timely reading on the health of the world's largest economy.

A rise in unemployment is one of the few developments that could get the Federal Reserve to start thinking of easing policy again, with investors having largely given up on a cut this month or next. 0#USDIRPR

The dollar index was last marginally higher at 98.86, trimming some of its losses from earlier in the session.

The euro EUR=EBS similarly scaled a six-week top before paring some of its gains to last trade at $1.1421, while sterling GBP=D3 dipped 0.14% to $1.3525.

A softer U.S. jobs report would be a relief for the Treasury market, where 30-year yields US30YT=RR continue to flirt with the 5% barrier as investors demand a higher premium to offset the ever-expanding supply of debt. US/

The Senate this week will start considering a tax-and-spending bill that will add an estimated $3.8 trillion to the federal government's $36.2 trillion in debt.

"The evidence suggests term premium being re-priced considerably higher to account for U.S. fiscal, trade, credit, and geoeconomic risks alongside some hedge against (U.S. dollar) debasement," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho.

Against the yen, the dollar JPY=EBS rose 0.2% to 142.92.

Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank will raise interest rates once it is sufficiently convinced that economic and price growth will re-accelerate after a period of stagnation.

In commodities, oil prices rose on concerns about supply, with Brent crude futures LCOc1 up 0.34% to $64.85 a barrel, while U.S. crude CLc1 gained 0.45% to $62.79 per barrel. O/R

Spot gold XAU= retreated from a four-week high and last stood at $3,362.10 an ounce. GOL/