LONDON The dollar and world shares were losing steam on Monday as the momentum from last week's strong U.S. jobs data faded and attention began to turn to the fast-approaching earnings season.
Weak manufacturing data from Germany took the wind out of European shares and the euro, but for the most part moves were minor and there was little sign of any nervous reaction in the region's bond markets.
The dollar was just about clinging onto a fifth straight day of gains against a basket of other major currencies - its longest streak of gains since October - but a pause in U.S. bond yields left it struggling to maintain its altitude.
"Overall the dollar is a bit stronger and that will remain in place over the next week," said Vasileios Gkionakis, global head of FX strategy at UniCredit in London.
"Rates in the U.S. are going to grind higher, dollar/yen is going to grind higher and probably in the next week or so against the euro as well."
Wall Street was expected to start down 0.1-0.2 percent on reopening after Friday's holiday, according to futures markets. [.N]
After global stocks reached record highs last week, investors are now looking at whether those share prices will be justified by quarterly earnings reports and forecasts in the United States and elsewhere, with aluminium producer Alcoa kicking off the U.S. earnings season on Tuesday.
German industrial output data soured sentiment in European share markets as it fell 1.8 percent on the month in May, its biggest drop in more than two years, confounding expectations of a steady reading from Europe's manufacturing powerhouse.
Germany's DAX fell 0.2 percent after the industrial output data.
"It's just more evidence that overall economic growth has slowed down in the second quarter from the strong first quarter," Ioan Smith, director at KCG, said.
The data only briefly affected the euro, however, probably because after four days of falls, most sellers in the market had been shaken out.
The single currency was quickly back on its feet at $1.3590 versus the dollar. It skimmed a new 22-month low against the British pound but that was due to bets the Bank of England will be the first of the world's big central banks to raise interest rates. [FRX/]
France's CAC 40 share index was down 0.4 percent after pharmaceuticals heavyweight Sanofi warned currency effects would dent its earnings. A drop in Vienna's stock index also weighed on European shares for a second day, as it tumbled 1.1 percent after falling 3 percent on Friday on concerns about risks to Austrian banks' business in eastern Europe. [.EU]
Global shares rallied broadly last week, pushing MSCI's All World share index to a record high, as U.S. employment growth smashed forecasts and unemployment fell to near a six-year low of 6.1 percent.
Market focus is now shifting to earnings. Analysts polled by Reuters expect U.S. earnings growth of 6.2 percent for the second quarter, and a return to double-digits in the third and fourth quarters of 10.9 percent and 11.9 percent, respectively.
"People said the U.S. earnings would be bad for January-March but in the end the profits were up. I would expect decent results (this time)," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.
Despite the clear improvement in the U.S. jobs market in recent months, the Federal Reserve is widely expected to keep interest rates near zero for at least a year. even as it trims its bond-buying stimulus.
U.S. bond yields, which tend to underpin borrowing costs globally and jumped after last week's forecast-busting jobs data, stayed near a 10-month high of 0.5238 percent for two-year Treasuries as U.S. trading loomed.
The dollar index had also steadied at 80.285 after hitting its highest level in a week and a half.
In emerging markets, MSCI's emerging market stock index hit a 13-month high as shares in India hit their third consecutive record high ahead of this week's budget.
Indonesian markets also rallied ahead of a presidential election on Wednesday where Jakarta Governor Joko "Jokowi" Widodo, seen as market friendly, is neck-and-neck in opinion polls with former special forces chief Prabowo Subianto.
Among commodities, U.S. crude oil futures traded little changed at $103.88 per barrel, near Friday's low of $103.67, as Libya geared up to resume exports after the end of a rebel group's almost year-long blockage of two major ports.
With safe-haven assets out of favour, spot gold slipped 0.5 percent to $1,314 an ounce, after five consecutive weekly gains. Silver fell 1 percent.
(Additional reporting by Alistair Smout in Edinburgh; Editing by Susan Fenton)