GLOBAL MARKETS-Asian shares hit 4-month high as U.S., China recoveries gather pace

* Shanghai shares hit 14-month high on service sector
recovery
* U.S. payrolls jump 4.8 mln but hurdles lie ahead
* Rising U.S. COVID-19 cases threaten U.S. recovery
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano and Imani Moise
TOKYO/NEW YORK, July 3 (Reuters) - Asian shares rallied to a
four-month high on Friday on robust U.S. payrolls data and a
brisk pickup in Chinese service sector activity but a surge in
coronavirus cases in the United States kept a lid on further
risk-taking.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.5%, reaching their highest level since
late February, while Japan's Nikkei .N225 rose 0.4%.
Mainland Chinese shares, which were among the best
performers over the past month, extended gains, with the
Shanghai composite index .SSEC hitting a high last seen in
April 2019.
China's services sector expanded at the fastest pace in over
a decade in June, the Caixin/Markit services Purchasing
Managers' Index (PMI) showed, as the easing of
coronavirus-related lockdown measures revised consumer demand.
"Recovery in China's domestic demand is accelerating, even
though the external demand is still weak. Thus investors are
shifting to domestic-demand oriented sectors," said Wang
Shenshen, senior strategist at Mizuho Securities in Tokyo.
S&P 500 futures were down 0.1% ESv1 but volumes were lower
than usual due to a U.S. markets holiday on Friday for
Independence Day.
The country's nonfarm payrolls surged by 4.8 million jobs in
June, above the average forecast of 3 million jobs in June,
thanks to rises in the hard-hit hospitality sectors.
But economists noted there were caveats to the upbeat
headline figures.
Even after two months of job recovery from May, the U.S.
economy has recovered only just over a third of a historic
plunge of 20.787 million in April.
A separate report on jobless claims, the most timely data on
employment, showed initial claims for state unemployment
benefits fell just 55,000 to a seasonally adjusted 1.427 million
for the week ended June 27.
The number of people receiving benefits after an initial week
of aid rose 59,000 to 19.290 million in the week ending June 20.
The momentum of recovery faces more headwind as a surge of
new coronavirus infections prompts U.S. states to delay and in
some cases reverse plans to let stores reopen and activities
resume.
More than three dozen U.S. states saw increases in COVID-19
cases, with cases in Florida spiking above 10,000. On the other hand, expanded unemployment benefits to support
those who lost their jobs due to the pandemic are due to expire
at the end of this month, though many investors think the
Congress could extend the measure.
"Back to pre-pandemic (job levels), in my view, will be a
matter of years," Danielle DiMartino Booth, CEO and chief
strategist of Quill Intelligence in Dallas, TX. "With luck, it
will be two years but that is likely optimistic given the number
of permanent closures we've learned of."
Sino-U.S. diplomatic tensions have also cast a shadow.
The U.S. State Department warned top American companies
including Walmart WMT.N , Apple AAPL.O and Amazon.com Inc
AMZN.O over risks faced from maintaining supply chains
associated with human rights abuses in China's western Xinjiang
province. "China will keep a hard line stance towards the next year
when the Chinese Communist Party will celebrate its 100th
anniversary since its founding," said Akira Takei, a bond fund
manager at Asset Management One.
"Global companies can no longer have supply chains in China
as they used to."
In foreign exchange, major currencies were little changed,
with the euro at $1.1245 EUR= and the yen changing hands at
107.52 per dollar JPY= .
Oil prices eased on concerns about the resurgence of the
coronavirus globally and in the United States, the world's
largest oil consumer.
Brent crude LCOc1 fell 0.65% to $42.86 a barrel while
U.S. crude CLc1 dropped 0.66% to $40.38 a barrel.

(Editing by Sam Holmes)