By Alun John

LONDON, June 2 (Reuters) -Global stocks and commodities rose on Friday while the dollar headed for its biggest weekly drop since March, as sentiment was buoyed by signs the Fed will skip a rate hike at its next meeting and by the approval of U.S. debt ceiling legislation.

Markets are now focused on U.S. jobs data due at 0830 EST (1230 GMT), the most significant macroeconomic release of the week, for more cues on the Federal Reserve's rate hike path.

The U.S. Labor Department's employment report is likely to show nonfarm payrolls increased by 190,000 jobs last month after rising 253,000 in April, according to a Reuters survey of economists.

"The release is really going to dictate the future of Fed policy after the speech of the vice chair-designate Jefferson that likely took a June rate hike off the table," said Jeff Schulze, head of economic and market strategy at Clearbridge

"The only way that (a June rate increase) is going to be in play is if you see a large beat to the upside of both payrolls and CPI."

Vice chair nominee Philip Jefferson said on Wednesday skipping a rate hike at a coming meeting would allow the rate-setting Federal Open Market Committee to see more data before making decisions about the extent of additional policy firming, remarks echoed by several other Fed speakers.

Jefferson's nomination as vice chair is still pending approval from the U.S. Senate.

Market pricing indicates roughly a 75% chance the Fed will hold rates steady at its upcoming meeting, according to the CME's Fedwatch tool, though there is roughly a 50% chance of a 25-basis-point hike at one of the Fed's June or July meetings.

The dovish tone caused a rally in U.S. Treasuries. The 10-year yield, last at 3.6104%, was steady on the day on Friday, but was set for a weekly drop of around 20 basis points, its biggest weekly fall since mid March. US/US10YT=RR

That helped shares to rally, and Europe's broad STOXX 600 index .STOXX rose 1% and headed for a second day of gains.

European mining stocks .SXPP increased 4.4%, boosted by a Bloomberg report China is working on new measures to support its property market.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose 2.3% earlier on Friday, with Japan's Nikkei .N225 ending the day at its highest close since July 1990..T

Nasdaq NQcv1 and S&P 500 futures EScv1 were both up around 0.5% after each index reached nine-month closing highs on Thursday. .IXIC, .SPX .N

DEBT DEAL

Boosting the mood was the U.S. Senate passing bipartisan legislation backed by President Joe Biden that lifts the government's $31.4 trillion debt ceiling, averting what would have been a first-ever default.

"The fact that this is potentially getting resolved earlier does remove some potential distortions," said Phil Shucksmith, portfolio manager at Newton Investment Management

Investors' focus now will turn to the market impact of the U.S. Treasury issuing more bonds to refill its empty coffers, which could put pressure on liquidity, or ready cash available to banks.

"We've probably got some degree of rebuild of that treasury general account," said Shucksmith, which, along with quantitative tightening, "means I think there's going to be tightening of financial conditions."

Lower U.S. yields were also playing out in currency markets with the dollar index =USD, which measures the U.S. currency against six major peers, steady on the day at 103.49, but set for a weekly fall of 0.7%, its biggest weekly decline since March.

Gains against the dollar have been shared out fairly broadly among other currencies, but sterling was to the fore, set for a weekly gain of 1.4%, its most since December. GBP=D3

The euro is up 0.27% against the dollar this week EUR=EBS, dragged by lower European yields after inflation showed signs of slowing, welcome news for the European Central Bank and reinforcing market bets that the ECB too could be done with interest rate hikes in the coming few months. GVD/EUR

The bullish sentiment, softer dollar and China property news helped push oil prices higher, with U.S. crude CLc1 up 1.7% at $71.29 per barrel and Brent LCOc1 at $75.53, up 1.7%. Markets are also weighing the likelihood of price-supportive OPEC+ production cuts over the weekend.O/R

Copper prices were heading for their first weekly gain since April with other metals trading higher too. MET/L

Spot gold was up marginally at $1,979 an ounce, but set for its biggest weekly gain in nearly two months, as a softer dollar and lower yields bolstered the bullion's appeal. GOL/

Reporting by Ankur Banerjee; Editing by Lincoln Feast, Kim Coghill, Sriraj Kalluvila and Andrew Heavens

To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA