* Euro zone yields edge higher after July tumble
* Analysts say watch U.S. rates market for direction
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, Aug 2 (Reuters) - Euro zone government bond yields rose in early trading on Monday as optimism about more fiscal stimulus in the United States and improving sentiment in beaten-down Asian markets encouraged investors into riskier assets.
The rise was measured, however, and follows the month of July in which government bonds globally enjoyed their biggest monthly rally since at least March 2020, driven by risks from the COVID-19 Delta variant and central bank assurances that a paring back of monetary support was still far off.
Germany's 10-year government bond yield fell 25 basis points in July, the biggest monthly drop since January 2020, while inflation-linked yields were down by their most in nine years.
Despite the ongoing worries that have driven investors into safer government debt in recent weeks, the broader investment mood was bullish on Monday, with stocks back at record highs and Chinese shares showing a strong rebound after falling heavily last week.
There was the prospect of more fiscal stimulus ahead as U.S. senators worked to finalise a sweeping $1 trillion infrastructure plan that could pass this week.
By 0715 GMT, Germany's 10-year yield was 1 basis point higher at -0.449%.
There were similar small gains across core euro zone bond markets as well as peripheral bonds , although Italian bond yields were unchanged on the day .
Data this week includes the final purchasing managers' index survey for manufacturing in July due at 0800 GMT on Monday, with the composite and services surveys to follow on Wednesday, although analysts say developments in the U.S. market are likely to be of more significance for euro zone bond yields.
"It is much more likely in our view that U.S. rates will be in the driving seat this week, although long-dated supply from France and Spain could register after the aggressive curve flattening seen in the past month," ING analysts said in a note, while also noting investors' focus on a Bank of England meeting on Thursday.
Markets will also be waiting for crucial U.S. jobs data due on Friday. (Reporting by Tommy Wilkes Editing by Anil D'Silva)