GLOBAL MARKETS-Asian shares strike cautious tone as COVID-19 cases spike

(Adds European futures, updates levels)

* Asian stock markets :

* COVID-19 cases rise in Asia and Australia

* Markets give thumbs up to U.S. bipartisan infrastructure deal

* Oil climbs to highest since Oct. 2018

* Currency markets activity muted

SYDNEY, June 28 (Reuters) - Asian shares started the week in a cautious mood on Monday, as a spike in coronavirus cases across the region over the weekend hurt investor sentiment while oil hovered around 2-1/2 year highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last a shade weaker at 702.57. Japan’s Nikkei slipped 0.2%, with South Korea’s benchmark KOSPI down about the same amount.

Investors were concerned about a spike in coronavirus infections in Asia, with Australia’s most populous city of Sydney plunging into a lockdown after a cluster of cases involving the highly contagious Delta strain ballooned.

Indonesia is battling record high cases while a lockdown in Malaysia is set to be extended. Thailand too announced new restrictions in Bangkok and other provinces.

Chinese shares were a touch higher with the CSI300 index up 0.2%. Data over the weekend showed profit growth at China’s industrial firms slowed again in May as surging raw material prices squeezed margins and weighed on factory activity.

Investors will keep a close eye on an official survey of Chinese factory activity due Wednesday. The manufacturing reading is expected to slow to 50.8 from 51. The private sector Caixin Manufacturing PMI will follow later in the week.

Futures pointed to a cautious open for share markets in Europe as well. Pan-region Euro Stoxx 50 futures slipped 0.05%, while FTSE futures edged 0.01% higher.

S&P 500 futures added 0.05%.

Global shares weakened about 0.1% after reaching record highs last week as weaker-than-expected U.S. inflation and news of a bipartisan U.S. infrastructure agreement boosted risk appetite.

The infrastructure plan is valued at $1.2 trillion over eight years, of which $579 billion is new spending.

“Investors are keenly watching the progress of U.S. President Biden’s bipartisan infrastructure deal through congress. The package could boost demand significantly, driven by investment in renewables and electronic vehicle (EV) infrastructure,” ANZ analysts wrote in a note.

Oil prices slipped slightly after earlier climbing to their highest since October 2018 on expectations demand growth will outstrip supply and OPEC+ will be cautious in returning more crude to the market from August.

Brent futures lost 8 cents to $76.10 a barrel, while U.S. crude was flat at $74.05.

On Friday, the S&P 500 rose 2.7% for the week, its strongest weekly gain since early February after data showed a measure of underlying inflation rose less than expected in May, easing fears of a sudden tapering in stimulus by the Federal Reserve.

The Dow climbed 0.7% while the tech-heavy Nasdaq dropped 0.06% after holding near the previous session’s record high.

Later in the week, a closely-watched U.S. jobs report will be released for June which could point to strong labour demand.

Yields for benchmark 10-year U.S. Treasuries, jumped back above 1.50% to close out a week in which rates notched their largest gains since March.

Monetary and fiscal stimulus around the world in response to the COVID-19 pandemic is boosting financial assets, despite an uneven pace of recovery between regions.

Boston Federal Reserve Bank President Eric Rosengren on Friday warned a build-up of financial stability risks linked to a low interest rate environment could lead to another downturn that interrupts the labour market recovery and impedes a return to maximum employment.

In currencies, the U.S. dollar was slightly firmer at 91.856 against a basket of other currencies.

The euro eased to $1.19225, while the Japanese yen strengthened to 110.625 versus the greenback.

Reporting by Swati Pandey. Additional reporting by Kevin Buckland; Editing by Shri Navaratnam and Jacqueline Wong