* Asian equities encouraged by upbeat US jobs report
* US, EU bonds supported by soft inflation, safe-haven bid
* Dollar steady after failing to sustain post-jobs rally
By Wayne Cole
SYDNEY, May 5 Asian share markets inched ahead
on Monday as a robust U.S. jobs report was taken as positive for
global growth prospects even as a lack of inflation pulled down
bond yields across the United States and Europe.
Market holidays in Japan and South Korea thinned trade, as
did caution over the crisis in Ukraine.
Pro-Russian militants stormed a Ukrainian police station in
Odessa on Sunday and freed nearly 70 fellow activists, two days
after over 40 pro-Russian activists died in a blaze at a
building they had occupied.
Australia's market gained 0.5 percent in early business
, while MSCI's broadest index of Asia-Pacific shares
outside Japan edged up 0.2 percent.
HSBC will release its final reading on China's manufacturing
sector at 0145 GMT. The preliminary survey showed a downturn in
factory activity eased slightly in April as declines in new
orders and output slowed.
Japanese stocks could draw demand later in the week given
reports the government was likely to say next month that it will
lower the effective corporate tax rate to 20 percent from around
35 percent currently, according to the Yomiuri newspaper.
On Wall Street, the Dow ended Friday 0.28 percent
lower, while the S&P 500 lost 0.13 percent and the Nasdaq
Still, all the indices were up for the week. The Dow and S&P
both added 0.9 percent, and the Nasdaq 1.2 percent.
The soft finish on Friday was a disappointment given the
strength of the U.S. payrolls report.
The increase of 288,000 in U.S. jobs was the largest since
January 2012 and handily above forecasts. Unemployment dropped
to 6.3 percent, though largely because of a steep fall in
participation as more people left the labour force.
Crucially for bonds, there were scant signs of inflationary
pressure in the report with average weekly earnings unexpectedly
soft, just the latest evidence of muted wages growth.
The general absence of price pressures has helped
longer-dated Treasuries rally hard in recent weeks with yields
on 30-year paper diving to 10-month lows on Friday.
That in turn has sharply narrowed the gap between short- and
long-term yields, a flattening of the curve that points to a
marked lessening in inflation fears.
All of which is one reason investors still assume the
Federal Reserve will be in no hurry to raise interest rates. The
futures market generally has a first move pencilled in for the
middle of next year and a slow-paced tightening thereafter.
"For the Fed, the recent data is strong enough to validate
the status quo - ongoing $10bn per meeting tapering and the
first rate hike in Q2 or Q3 next year," said analysts at
Commonwealth Bank of Australia.
"But pointing in the other direction is the general
patchiness of data in recent months, ongoing tensions in the
Ukraine, excessive short positioning and perhaps a loss of
bullish sentiment in U.S. equities."
The fall in U.S. yields has also undermined support for the
dollar, which notably failed to sustain a post-jobs rally on
Early Monday, the euro was steady at $1.3871 having
recovered from a low of $1.3812 on Friday. Against the yen, the
dollar was back at 102.23, having retreated from a near
one-month peak of 103.03.
The dollar index had initially rallied to a high of
79.852 on Friday, only to then slide to a session low of 79.469.
It was last flat at 79.506.
Among commodities, oil prices were mixed in slow trade. U.S.
crude futures gained 1 cent to $99.77 a barrel while
Brent crude eased 6 cents to $108.53.
Gold held firm at $1,300.19 an ounce after bouncing
over $14 on Friday.
(Editing by Shri Navaratnam)