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GLOBAL MARKETS-Asian shares follow Europe higher on EU relief, auto merger

Andrew Galbraith

* MSCI Asia ex-Japan +0.07%

* Falling bond yields point to continued risk aversion -analyst

* Brent crude drops below $70 per barrel after rally

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

SHANGHAI, May 28 (Reuters) - Asian shares tracked European gains on Tuesday, as relief over EU election results eased concerns about political difficulties in the bloc and merger news supported auto shares, although persistent concerns about trade capped regional sentiment.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.07% in early trade, and U.S. S&P 500 e-mini futures rose 0.14% to 2,835.75.

Australian shares were up 0.51%, while Japan's Nikkei stock index gained 0.41%.

Those small gains followed a relatively light session in Europe on Monday, with financial markets the U.K. and U.S. closed for holidays.

European auto shares had rallied after Italian-American carmaker Fiat Chrysler confirmed it had made a "transformative merger" proposal to French peer Renault in a deal which would create the world's third-biggest carmaker. That sector rally spilled into Asia with Mitsubishi Motors Corp in Japan adding 3.17% and Nissan Motor Co gaining 2.11%.

Provisional results from EU elections also buoyed markets after pro-union parties kept a firm grip on power in elections to the European Parliament. The pan-European STOXX 600 added 0.22%.

"Although Eurosceptic and antiestablishment parties didn't win as many seats as expected, their influence has increased significantly. This could have implications for the political colour of key EU positions," said Rodrigo Catril, senior FX strategist at National Australia Bank.

"The Parliament composition is also likely to have implications on the priority agenda for future EU reform, particularly with respect to things like immigration, fiscal spending and fiscal union," he added, noting a decrease in bond yields pointed to continued risk aversion.

Benchmark 10-year German Bunds hit a low of -0.147% on Monday, their lowest level since September 2016.

On Tuesday, U.S. yields were also lower. Benchmark 10-year Treasury notes yielded 2.3132%. The two-year yield touched 2.1766%.

Trade concerns also remain high on investors' list of concerns. U.S. President Donald Trump said on Monday that Washington was not ready to make a deal with Beijing but he expected one in the future, while at the same time pressing Japanese Prime Minister Shinzo Abe to even out a trade imbalance with the United States.

The dollar was up 0.05% against the yen at 109.55, and fell 0.04% against the euro, with the common currency buying $1.1192.

The dollar index, which tracks the greenback against a basket of six major rivals, 0.14% higher at 97.754.

In commodity markets, oil prices wavered after gaining more than 1% on Monday on tensions in the Middle East and OPEC-led supply cuts, as well as continuing Russian supply disruptions after a contamination problem discovered last month.

Brent crude dipped back below the $70 mark, falling 0.26% to $69.93 per barrel, but U.S. West Texas Intermediate crude remained higher, adding 0.72% to $59.05 per barrel.

Spot gold was flat at $1,284.80 per ounce.

Bitcoin, which on Monday had touched $8,939.18, its highest level in more than a year, retreated 0.14% to$8,758.48. The cryptocurrency topped $8,000 for the first time since July 2018 on May 13. (Reporting by Andrew Galbraith; Additional reporting by Tommy Wilkes in LONDON; Editing by Sam Holmes)