* E-mini S&P 500 futures rise 1%, oil steadies, dollar gains pause
* MSCI AxJ losses muted compared with Wall St plunge
* Volatility gauges surge as U.S. election looms
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tom Westbrook and Pete Schroeder
SINGAPORE/WASHINGTON, Oct 29 (Reuters) - Asian stock markets fell on Thursday but not as sharply as Wall Street's rout overnight, while oil bounced off lows and U.S. futures jumped, as Asia's brighter economic outlook offset investor worries about fresh COVID-19 lockdowns in Europe.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1%. Japan's Nikkei .N225 fell 0.8% and drops in Hong Kong .HSI , Sydney .AXJO , Shanghai .SSEC and Seoul .KS11 were smaller than 1.5%.
That is heavy but much less than the S&P 500 index's 3.5% drop .SPX or the 4.2% fall by Germany's DAX .GDAXI which led European shares .STOXX to their lowest level since late May.
S&P 500 futures ESc1 and Dow futures YMc1 rebounded 1%, which traders attributed to heightened volatility and to the less gloomy mood around Asia as China's economy builds up steam.
"Asia is not really partaking in this second or third wave story because it's got its COVID largely under control," said Rob Carnell, chief economist in Asia at Dutch bank ING.
"As a result, domestic economies look reasonable. Exports will remain soft...but domestically they are still doing OK and doing a lot better relative to (Europe and the U.S.)."
Oil rose from a four-month low overnight and the risk-sensitive Australian and New Zealand dollars rose about a quarter of a percent. O/R AUD/
Still, both currencies are, for now, headed for a weekly loss against the dollar and so is the euro, as worries about the new lockdowns seemed to catch investors by surprise. FRX/
In France, people will be required to stay in their homes from Friday, except to buy essential goods, seek medical attention or exercise. Germany will shut bars, restaurants and theatres from Nov. 2-30. yesterday the market was travelling with the hope the improvement of health care services in dealing with the pandemic would prevent the introduction of severe lockdowns," National Australia Bank FX strategist Rodrigo Catril said in a note.
"At least in Europe, this dynamic has now changed ... the question now is whether U.S. states will follow."
FUNDAMENTALS
Central bank meetings and economic data are the main focus later on Thursday, with gathering uncertainty about the U.S. Nov. 3 election also keeping investors on edge.
The Bank of Japan is set to maintain its massive stimulus programme and vow to take further action if the virus' economic fallout threatens a return to deflation. expect the European Central Bank to hold off on new measures and instead hint at action in December, which is likely to keep a lid on the euro. common currency EUR= hit a 10-day low on the dollar and a hundred-day low on the yen EURJPY= overnight, before recovering slightly. It last bought $1.1751.
German unemployment and inflation data, European confidence surveys and advance U.S. GDP figures will also be closely watched - with the U.S. figure likely to show record growth, but still leave the economy behind where it began 2020. disappointment in these numbers may have a magnified market impact, given the current weakness," said CMC Markets' Sydney-based strategist, Michael McCarthy.
Investors are also increasingly wary of a contested U.S. election result that could unleash a wave of risk-asset selling.
Wall Street's "fear gauge," the Cboe Volatility Index .VIX surged on Wednesday to its highest level since June and a jump in implied currency volatility indicates that a wild ride is expected. yuan implied volatility CNHSWO= hit a five-year high on Thursday. CNY/
The U.S. bond market, however, was somnolent as investors looked past polling day and figured huge government borrowing for coronavirus relief spending will happen no matter who wins.
Benchmark U.S. 10-year yields US10YT=RR rose overnight and added about a basis point on Thursday to 0.7894%.
"Looking ahead, heightened volatility in the run-up to the election and even, potentially, following the election will eventually subside," said Seema Shah, chief strategist at Principal Global Investors.
"Markets will soon reassert a trajectory determined by fundamentals, rather than election news flow."
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