AIRSHOW-Europe faces Herculean challenge to develop new fighter jet
* France-German agreement seen as key catalyst (Adds reference to Russian fighter development in 7th paragraph)
* Markets quiet Monday with Japan and Singapore on holiday
* Focus on U.S. Fed, with several officials speaking
* ECB meeting and US jobs report feature later in week
By Wayne Cole
SYDNEY, Nov 4 Asian markets started the week on a sluggish note on Monday as investors chose discretion over valour ahead of central bank meetings in Europe and the always-critical U.S. payrolls report.
Trading was thinned by holidays in both Japan and Singapore which kept MSCI's broadest index of Asia-Pacific shares outside Japan just a fraction firmer at 480.04.
Australia's share market edged up 0.2 percent as another domestic bank reported record profits.
Major currencies were likewise quiet with the dollar still well supported in the wake of upbeat U.S. manufacturing data that stirred speculation the Federal Reserve might scale back its bond-buying in December, rather than in March as many in the market currently anticipate.
There are no less than four Fed officials speaking on Monday, starting with Fed Bank of Dallas President Richard Fisher in Sydney. Fed Governor Jerome Powell and the heads of the St. Louis and Boston Feds all appear later in the day.
The dollar index was holding firm at 80.715 having climbed to a six-week peak on Friday. It was also up on the yen at 98.73 and threatening a major chart target at 99.00.
The dollar fared best against the euro which was undermined by speculation the European Central Bank (ECB) would have to ease again given disappointing news on unemployment and a startlingly low reading of inflation.
The single currency was pinned at $1.3489 on Monday, well below its recent high of $1.3832. The ECB holds a policy meeting on Thursday and it will be under intense pressure to stimulate the economy.
"We expect the opening statement, and Q&A, to have a distinctly dovish tone," wrote analysts at RBC Capital Markets in a note to clients.
"For now, we think that the Governing Council will refrain from any immediate action, but we expect the downbeat tone of next week's meeting to lay the groundwork for a policy response over the next few months."
The Bank of England holds it policy meeting on Thursday and is expected to stay on hold following a run of improving economic data recently.
A bigger event for markets will be Friday's U.S. payrolls report which is expected to show a modest rise of just 125,000 in October, amid some uncertainty about the impact of the government shut down. A soft report, and particularly any rise in the jobless rate, would lean against the Fed tapering in December.
Also of note will be the first reading of U.S. gross domestic product (GDP) due on Thursday. That is expected to show annualised growth of 1.9 percent in the third quarter, down from 2.5 percent the previous quarter.
All the talk of Fed tapering saw U.S. Treasury yields rise for a third straight session on Friday. Yields on the benchmark 10-year U.S. Treasury note jumped to 2.63 percent, leaving behind the week's low of 2.47 percent.
Cash Treasuries were not trading in Asia on Monday due to the Japanese holiday, but Treasury futures were 3 ticks lower.
The rise in yields was not enough to deter investors from buying stocks, and Wall Street ended Friday with moderate gains.
The Dow Jones industrial average finished Friday with a gain of 0.45 percent, while S&P 500 Index rose 0.29 percent. For the week, the Dow gained 0.3 percent, the S&P added 0.1 percent, while the Nasdaq fell 0.5 percent.
European stock markets eased off five-year highs amid weakness in regional corporate earnings. The pan-European FTSEurofirst 300 index of leading European companies fell 0.31 percent.
In commodity markets, prices were mostly pressured by the bounce in the U.S. dollar. Spot gold was trading at $1,314.34 an ounce having crumbled from a peak of $1,361.60 last week.
Oil prices steadied following last week's losses as a firmer dollar and ample supplies outweighed concerns about a drop in Libyan crude exports.
Brent crude for December delivery was up a single cent at $105.92 a barrel. U.S. oil for December delivery added 3 cents to $94.64.
BERLIN, June 24 A lawyer for one of the former Volkswagen managers sought in the United States in connection with the carmaker's diesel emissions-cheating scandal has advised him not to leave Germany, she told a German daily.