* Asia shares ex-Japan down 5 pct in past two weeks

* Sovereign bonds in demand, Australian yields dive

* Dollar steady for now, vulnerable to payrolls data

* Oil bounces as Canada wildfires threaten production

By Wayne Cole

SYDNEY, May 5 (Reuters) - Asian shares slipped for a seventh straight session on Thursday as mixed economic data did nothing to assuage concerns about global growth, keeping sovereign bonds well supported as a hedge against deflation risks.

The latest survey from China showed the service sector expanded at a slower pace in April, though firms did resume adding staff.

The Caixin/Markit services purchasing managers' index (PMI) dropped to 51.8, from 52.2 in March, but at least stayed in growth territory. Hong Kong's version of the PMI slid deeper into contractionary territory to touch an eight-month low.

The patchy outcomes left Shanghai stocks flat while trade across the region was stifled by a holiday in Japan.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent, and has now shed 5 percent in just two weeks.

In Europe, financial spreadbetters at IG expected the FTSE 100 and DAX to open around 0.4 percent firmer.

"I think what has taken place more than anything else over the past 48 hours is the questioning of the reflation trade that was starting to be latched on by many, especially when you consider the recent price action in the USD, commodities and equities," CitiFX analysts said in a note.

"If that reflation trade notion is in fact dying, the unwind of the past few weeks of price action would potentially be the more significant reaction in markets."

One shift already under way was a revival in demand for sovereign bonds, a favoured hedge against deflation.

Yields on 10-year U.S. Treasury notes were at their lowest in two weeks at 1.777 percent, a notable rally from last week's top of 1.94 percent.

The equivalent yield in Australia has plunged no less than 31 basis points in the past week as record-low core inflation forced the country's central bank to cut its cash rate to an all-time low.

The rush to bonds has left equities out in the cold. The Dow ended Wednesday down 0.56 percent, while the S&P 500 eased 0.59 percent and the Nasdaq 0.79 percent.

A MIXED BAG

Wall Street slipped even as data showed the vast U.S. services sector expanded in April as new orders and employment accelerated, offering hope economic growth would rebound after a sluggish first quarter.

Yet other figures showed private employers hired the fewest workers in three years, sparking concerns the all-important payrolls report might also disappoint.