* Treasury yields rise to 7-yr highs, yield curve steepen
* 30-yr Treasuries signals higher yields- Doubleline's Gundlach
* Oil continues to retreat from 4-year highs
* Investors await U.S. jobs data for Sept due later on Friday
By Tomo Uetake
TOKYO, Oct 5 (Reuters) - Asian shares were fragile on Friday after benchmark U.S. Treasury yields surged to a seven-year high and strong economic data fanned concerns about inflation and the risk of faster-than-expected interest rate rises.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, while Japan's Nikkei dropped 0.5 percent and Australian benchmark was up just 0.1 percent.
The yield on the benchmark 10-year note hit a fresh seven-year high of 3.232 percent overnight following data released the previous day that was seen as increasing the odds a Friday payrolls report would also be stronger than expected.
Wall Street stocks, in turn, have fallen broadly on Thursday, with the Dow suffering its first decline in six sessions and both the S&P 500 and Nasdaq seeing their worst day since June 25.
The Dow Jones Industrial Average fell 0.75 percent, while the S&P 500 lost 0.82 percent and the Nasdaq Composite dropped 1.81 percent.
The CBOE Global Markets volatility index, known as Wall Street's "fear gauge", jumped as high as 15.84 points, its highest since Aug. 15.
Fed Chairman Jerome Powell said earlier this week the economy can expand for "quite some time," which also helped the yield curve steepen to its highest in two months.
Jeffrey Gundlach, chief executive of Doubleline Capital, told Reuters on Thursday that the 30-year U.S. Treasury bond yield has broken above a multi-year base, which should lead to significantly higher yields for financial markets.
"As I have been saying, two consecutive closes above 3.25 percent on the benchmark 30-year Treasury means that my statement in July 2016 that we were seeing the low - I said italicized, underlined and in boldface - is now, looking at the charts, thoroughly corroborated," he said.
On Thursday, the 30-year Treasury note closed at 3.35 percent, compared with 3.34 percent on Wednesday.
The surge in Treasury yields has also prompted a rise in government bond yields across the globe, with a major exception being Italy, where borrowing costs dropped after the government said it would cut budget deficit targets from 2020.
Japanese and euro zone bond yields rose sharply, tracking their U.S. counterparts.
The U.S. dollar was steady but lingered near recent highs against the euro and the yen as investors assessed U.S. economic data and Powell's remarks.
The dollar index was flat, with the euro was also little changed at $1.1517. The Japanese yen softened 0.1 percent versus the greenback at 113.98 per dollar.
Investors are expected to scour the U.S. government's September payroll report scheduled for release on Friday and look closely for signs of wage growth, especially in light of anecdotal indications of rising wages.
"Although we are likely to see strong payroll figures later today, we could see some corrections in markets ahead of a long weekend in the United States and Japan," said Naoki Iwami, fixed income chief investment officer at Whiz Partners.
Oil prices rose on Friday, two days after hitting four-year highs, lifted by looming U.S. sanctions against Iran's crude exports that are set to start next month.
U.S. crude oil futures rose 0.7 percent to $74.85 a barrel and Brent crude futures gained 0.5 percent to $85.00 a barrel.
Reporting by Tomo Uetake Editing by Kim Coghill