By Ankur Banerjee

SINGAPORE, June 2 (Reuters) -Asian stocks jumped on Friday on increasing expectations that the Federal Reserve might stand still on rates and after the U.S. Senate passed legislation lifting the government's $31.4 trillion debt ceiling, avoiding a catastrophic default.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS surged 2% and was on course for its biggest one-day percentage gain since early January.

The exuberant mood looked set to continue in Europe, with Eurostoxx 50 futures STXEc1 up 0.45%, German DAX futures FDXc1 up 0.49% and FTSE futures FFIc1 0.18% higher. E-mini futures for the S&P 500 EScv1 rose 0.20%.

The Senate voted 63-36 to approve the bill that was passed on Wednesday by the House of Representatives, as lawmakers raced against the clock to avert what would have been a first-ever default. The Treasury Department had warned it would be unable to pay all its bills on June 5 if Congress failed to act.

"I think it's a bit of relief but that's about it," said Shane Oliver, head of investment strategy at AMP in Sydney. "I think it's now time for markets to move on to other things."

Also lifting risk sentiment was changing expectations of the Fed's monetary policy, with traders steadily dialling back their bets on the central bank raising interest rates again this month.

Markets are now pricing in a 20% chance of the central bank hiking by 25 basis points (bps) compared to a 50% chance a week earlier, according to the CME FedWatch tool.

Data overnight showed the number of Americans filing new claims for unemployment benefits increased modestly last week and private employers hired more workers than expected in May, pointing to continued labour market tightness.

"The market's focus is shifting to the economic front and Fed's decision on rates now," said Tina Teng, markets analysts at CMC Markets.

The spotlight will be on the Labor Department's closely watched unemployment report for May, due later on Friday. The data will help determine whether the Fed sticks with its aggressive rate hikes.

Dovish comments from Fed officials through the week have helped embolden Fed pause hopes, with Philadelphia Federal Reserve President Patrick Harker saying U.S. central bankers should not raise rates at their next meeting.

"It's time to at least hit the stop button for one meeting and see how it goes," Harker said.

AMP's Oliver said the prevailing sentiment now is that there will be a pause in June and that's helped markets. "If the payroll numbers are on the high side, it will cause the market to question whether there'll be a pause or not."

China shares, which have been dragged lower in past few weeks by worries over a sputtering post-pandemic economic recovery, also surged. The Shanghai Composite Index .SSEC was up 0.76% while Hong Kong's Hang Seng index .HSI spiked 3.6% higher, set for its best day in three months.

Australia's S&P/ASX 200 index .AXJO rose 0.42%, while Japan's Nikkei .N225 was 1% higher, continuing its hot run.

U.S. Treasury yields fell. In Asian hours, the two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 0.8 bps at 4.349%,having slipped around 5 bps on Thursday.

In the currency market, the dollar index =USD, which measures the U.S. currency against six major peers, was flat after dropping 0.6% overnight. FRX/

The Japanese yen JPY=EBS weakened 0.11% to 138.93 per dollar, while Sterling GBP=D3 was last trading at $1.2527, up 0.02% on the day.

The Aussie AUD=D3 rose as much as 0.61% to $0.6613, its strongest since May 24. The primary driver was an announcement by Australia's independent wage-setting body that it would raise the minimum wage by 5.75% from July 1.

The bullish sentiment helped push oil prices higher, with U.S. crude CLc1 up 0.53% to $70.47 per barrel and Brent LCOc1 at $74.67, up 0.53% on the day. Markets are also weighing the likelihood of price-supportive OPEC+ production cuts over the weekend.O/R

Reporting by Ankur Banerjee; Editing by Lincoln Feast and Kim Coghill

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