* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Asia shares ex-Japan enjoy best day since Jan
* Much riding on Fed being open to easing, and soon
* Global bonds rally after Draghi flags stimulus
* Trump says to meet Xi at G20, trade talks to resume
By Wayne Cole
SYDNEY, June 19 (Reuters) - Asian shares hit five-week highs on Wednesday as investors wagered the Federal Reserve would follow the lead of the European Central Bank and open the door to future rate cuts at its policy meeting later in the day.
Indeed, ECB President Mario Draghi's shock about-face on easing fuelled talk of a worldwide wave of central bank stimulus, firing up stocks, bonds and commodities. to the cheer was news U.S. President Donald Trump would meet with Chinese President Xi Jinping at the G20 summit later this month, even though most analysts doubt there would be a decisive breakthrough to end their countries' damaging trade dispute. expect no real change following the G20 sideline meeting. (But) the fact that both sides are talking should at least postpone thoughts of a further increase in tariffs," ING's Greater China economist Iris Pang said in a note.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 1.8% in its biggest daily rally since January. Shanghai blue chips .CSI300 rose 1.9% to a six-week peak.
Japan's Nikkei .N225 gained 1.8%, while Australia .AXJO added 1.1% to its highest in 11 years. E-Mini futures for the S&P 500 ESc1 were a fraction firmer, as were those for the EUROSTOXX 50 STXEc1 .
All eyes are now upon the Fed which is scheduled to release a statement at 1800 GMT, followed by a press conference by Chairman Jerome Powell shortly after. all the clamour for easing creates risks the Fed will disappoint.
"Market expectations for a dovish shift are nearly universal, the only question seems to be the degree," said Blake Gwinn, head of front-end rates at NatWest Markets.
Futures 0#FF: are almost fully priced for a quarter-point easing in July and imply more than 60 basis points of cuts by Christmas FEDWATCH .
"Markets will be looking for validation of this pricing," he added. "We think this represents a fairly high bar for the Fed to deliver a dovish surprise."
SUB-ZERO YIELDS
BofA Merrill Lynch's latest fund manager survey spoke volumes about the sea change in sentiment.
Allocation to global equities dropped 32 points to a net 21% underweight, the lowest since March 2009, while the bond allocation hit the highest since September 2011.
Interest rate expectations collapsed, while concerns about a trade war soared to be the top risk for investors, ahead of monetary policy impotence, U.S. politics and a slower China.
A Thomson Reuters/INSEAD survey found confidence among Asian companies at its lowest since the 2008-09 financial crisis as the trade war disrupts global supply chains. ASIATOPCO/
The mood shift was clear in bond markets where German yields DE10YT=RR hit record lows deep in negative territory, while Japanese yields JP10YT=RR sank to the lowest since August 2016 at -0.145%.
Yields on the U.S. 10-year note US10YT=RR reached the lowest since September 2017 at 2.016%, a world away from the 3.25% top touched in November last year.
The fallout in currencies was significantly less, in large part because it was hard for one to gain when all the major central banks were under pressure to ease.
The euro did pull back a bit after Draghi's comments, but at $1.1192 EUR= was still comfortably within the recent trading range of $1.1106-$1.1347.
The dollar eased slightly on the yen to 108.34 JPY= , but was a shade firmer on a basket of currencies at 97.651 .DXY . The yuan CNY=CFXS picked up to 6.9039 to the dollar on the trade news.
In commodity markets, the rate-cut buzz kept gold near 14-month highs at $1,345.16 per ounce XAU= .
Michael Hsueh, an analyst at Deutsche, noted the decisively dovish shift in central bank expectations was bullish for gold.
"This provides the desired backdrop - one in which investors are less likely to be concerned about the opportunity cost of holding a non-yielding asset, particularly versus the increasing stock of negative-yielding debt," he said.
Reflation trades helped support oil prices, as did hopes for a thaw in Sino-U.S. tensions. O/R
Brent crude LCOc1 futures were up 15 cents at $62.29, while U.S. crude CLc1 firmed 20 cents to $54.10 a barrel.
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^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Sam Holmes & Kim Coghill)