* MSCI Asia-Pacific index up 0.3 pct, Nikkei rises 0.5 pct
* Euro pulls back from 10-month lows
* Crude stands tall after rallying on ebb in supply concerns
By Shinichi Saoshiro
TOKYO, May 31 (Reuters) - Asian stocks rebounded from a two-month trough on Thursday, while the euro enjoyed a respite after sinking to its lowest in 10 months as political turmoil in Italy that had roiled global financial markets showed signs of easing.
MSCI’s broadest index of Asia-Pacific shares outside Japan tacked on 0.3 percent having slumped to its weakest since the start of April on Wednesday.
South Korea’s KOSPI added 0.6 percent and Japan’s Nikkei advanced 0.5 percent.
Overnight, the Dow rose 1.25 percent and the S&P 500 climbed 1.27 percent.
Global stocks were battered, safe-haven government bond yields fell sharply and the euro tumbled earlier in the week after Italy’s two anti-establishment parties scrapped plans to form a coalition, stoking fears of a general election that could be a referendum on the country’s euro membership.
A degree of calm, however, returned, with the two anti-establishment parties renewing efforts to form a coalition government rather than force Italy into holding elections for the second time this year.
Italy’s successful auction of five- and 10-year government bonds also assuaged concerns about its ability to finance itself after turbulence in its debt market resulted in the biggest one-day surge for two-year yields in 26 years.
“The financial markets had been able to assess and digest the situation in Italy over the past few days and it is now time for a bit of reprieve from the turbulence,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
“The reprieve will allow the market to return their focus back on fundamentals, such as Friday’s U.S. non-farm jobs report.”
The euro stood little changed at $1.1669 after rallying 1 percent the previous day. The currency had sunk to $1.1510 on Tuesday, its lowest since late July 2017.
The dollar index against a basket of six major currencies dipped 0.1 percent to 94.061 after surging to a near seven-month peak of 95.025 on Tuesday.
The U.S. currency traded at 108.730 yen, off a low of 108.115 brushed on Tuesday when risk aversion in the broader markets increased investor demand for its Japanese peer, which is often sought in times of market unrest.
The dollar received some support as signs of easing Italian political concerns pulled U.S. Treasury yields up from multi-week lows.
The 10-year Treasury note yield stood at 2.847 percent after sliding on Tuesday to 2.759 percent, its lowest since April 11.
Oil prices were elevated after rallying overnight as Russia’s central bank expressed caution on plans to boost oil supply.
U.S. crude futures inched down 0.2 percent to $68.07 a barrel after gaining 2.2 percent on Wednesday. Prices had fallen to a six-week low of $65.80 a barrel on Tuesday amid concerns that Saudi Arabia and Russia could increase output.
Brent crude dipped 0.25 percent to $77.31 a barrel after jumping 2.8 percent on Wednesday.
Reporting by Shinichi Saoshiro Editing by Shri Navaratnam