* S&P futures up 0.6%, Mexico peso up 1.6%

* Weak U.S. payrolls data bolster Fed rate cut expectations

* U.S. money market futures price in 2 rate cuts this year

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano

TOKYO, June 10 (Reuters) - U.S. stock futures and Asian shares rose on Monday after the United States dropped its threat to impose tariffs on Mexico in a deal to combat illegal migration from Central America, while weak U.S. jobs data raised hopes for U.S. interest rate cuts.

The Mexican peso jumped 1.75 percent in early Monday trade to 19.2579 on the dollar on news of the removal of the tariff threat.

But relief was widespread, as global investors had feared that opening up another trade conflict, while still battling with China, could tip the United States and other economies into recession.

S&P500 mini futures rose 0.4% and the 10-year U.S. Treasuries yield jumped back 3 basis points to 2.115 percent , after hitting a 21-month low of 2.053 percent on Friday on soft U.S. jobs data.

Japan's Nikkei gained 1.2 percent and South Korea's Kospi rose 0.55 percent while Australian markets were closed for a holiday, with MSCI's index of Asia-Pacific shares outside Japan almost flat.

The improved risk sentiment also helped lift the dollar against the yen 0.15% to 108.38 yen.

"The deal with Mexico is boosting sentiment while expectations of U.S. rate cuts will be also supporting share prices," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"Still, with limited progress seen so far in U.S-China trade talks, the most important issue for markets, stock prices will be able to rise only so much," he added.

Expectations the Fed will cut rates kept the dollar on the defensive after a weak jobs report from the U.S. Labor Department.

Nonfarm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists in a Reuters poll.

Wage growth, closely watched for its impact on inflation, slowed to 3.1 percent from a year earlier, the slowest annual increase since September. Just three months earlier, wages had been rising at their fastest rate in a decade.

Although Fed funds rate futures prices dropped on Monday after the Mexico deal, they are still pricing in more than two 25-basis point rate cuts by the end of this year, with one almost fully priced in by July.

"I would expect optimism to rule markets until the next Fed's meeting," said Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management.