* European, Asian shares gain, S&P 500 set to touch new record high
* Dollar reaches 10-week peak vs yen; euro steady before ECB meeting
* U.S. data more encouraging; improved jobs report expected
* ECB under pressure to ease, but analysts doubt move this week
By Marc Jones
LONDON, April 2 (Reuters) - World stocks extended their recent rally and the safe-haven yen sagged to a 10-week low on Wednesday, as investors focused on the positive in a mixed bag of global economic data.
Trading was largely cautious before Thursday's meeting of the European Central Bank and Friday's U.S. jobs numbers. Both could move markets significantly.
With Wall Street expected to add to Monday's record high later, Europe's main stocks markets rose 0.3 percent in morning trade. That put them on course for a seventh straight day of gains for the first time in six months.
Euro zone inflation slid to just 0.5 percent this month, leading investors to speculate the ECB will soon loosen policy. Messages from policymakers have been mixed, though.
On Tuesday, ECB Vice President Vitor Constancio told a news conference that low inflation was a concern but denied deflation was a threat. That was taken to mean the chances the central bank would move on Thursday were low.
The euro got a modest lift but had flattened out to stand at $1.3788 at 1100 GMT. It is a shade higher than when the last ECB last met, a fact that won't have gone unnoticed at the bank, which has cited the euro as one reason it might cut rates again.
"All the money that ran away at the height of the crisis is now coming back in, and that flow, as well as driving this periphery (bond) rally, is keeping the euro high," said Luke Bartholomew, an Aberdeen Asset Management fixed income and FX strategist. "We are short the euro, long the periphery, but it's incredibly frustrating being short the euro at the moment."
Greek and Portuguese bonds gained, riding the wave of optimism that has taken their governments' borrowing costs to post-euro-crisis lows, after almost three years of economic rehabilitation under EU/IMF bailout programmes.
Financial markets now appear to have recovered after stumbling earlier this year. A cutback in U.S. monetary stimulus, the geopolitical tug-of-war over Ukraine and signs the Chinese economy was slowing all weighed on markets.
Even sluggishness in China is now considered favourable, because it bolsters the case for stimulus. There are signs Beijing is hastening infrastructure spending in response.
Chinese state media reported on Wednesday that several cities may relax restrictions on home ownership, lifting stocks on the CSI300 property sub index 4 percent.
"Previously, the government repeatedly talked about controlling the property market, but now they aren't saying anything about this and instead there have been signs of easing policies," said Tian Weidong, head of research in Kaiyuan Securities in Xi'an.
Elsewhere in the region, MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.4 percent to a fresh four-month high, South Korea made a three-month peak while a weaker yen helped recent underperformer, the Nikkei, jump 1.7 percent.
U.S. economic news has whetted risk appetite. Manufacturing ISM data showed an expansion after weather-induced weakness in February. New-vehicle sales also saw a surprisingly brisk rise. The U.S. payrolls report on Friday is expected to show 200,000 jobs added in March.
The usual payrolls appetiser comes later at 1215 GMT in the form of ADP employment data. Economists polled by Reuters expect a pick up in hiring to 195,000.
"Things are progressing slowly and there is now a strand of dollar strength as people say this is where the U.S. data gets a bit better," said National Australia Bank strategist Gavin Friend.
The brighter tone put pressure the long-end of the U.S. Treasury curve, where yields on 10-year paper rose 2 basis points to the highest in a week at 2.7735 percent.
Shorter-dated debt fared better after Federal Reserve Chair Janet Yellen's comment this week that extraordinary stimulus would be needed for some time to come.
WILL THEY, WON'T THEY?
A Reuters poll of 22 euro money-market traders found 18 expected no change in the ECB's 0.25 percent refinancing rate this week.
The euro stuttered to a halt at $1.3788 as it tried for its fourth straight session of gains. It also gained as the yen softened, reaching 143.30. The dollar reached a 10-week top against the Japanese currency at 103.86 yen.
Among commodities, Brent crude was flat at $105.54 a barrel. It had shed over 2 percent overnight after Libyan rebels blocking oil ports hinted at a deal with Tripoli, which could increase supply.
U.S. crude eased 50 cents to $99.23 a barrel. It also lost around 2 percent on Tuesday, amid expectations domestic inventories would grow.
Spot gold was sulking at $1,283.40 an ounce. It touched a seven-week low of $1,277.29 on Tuesday. (Additional reporting by Wayne Cole in Sydney; Editing by Larry King)