SYDNEY, Aug 7 — Asian share markets were in a cautious mood today after a mixed US jobs report sparked a rally in beaten-down bonds, but new hurdles lay ahead in the shape of US and Chinese inflation figures due later this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan was a fraction firmer in thin trade, after losing 2.3 per cent last week.

Japan’s Nikkei .N225 slipped 0.2 per cent, but found support at its July low. A summary of the last Bank of Japan meeting showed members felt making yield policy more flexible would help extend the life of its super-easy stimulus.

Chinese blue chips .CSI300 eased 0.7 per cent with investors still disappointed at the lack of major and concrete stimulus steps from Beijing.

EUROSTOXX 50 futures STXEc1 dipped 0.3 per cent and FTSE futures FFIc1 0.5 per cent. Going the other way, S&P 500 futures ESc1 added 0.4 per cent and Nasdaq futures NQc1 0.5 per cent.

With roughly 90 per cent of S&P 500 earnings reported, results are 4 per cent better than consensus estimates with more than 79 per cent of companies beating the Street. Results due this week include Walt Disney DIS.N and News Corp NWSA.O.

Data on US consumer prices are forecast to show headline inflation picking up slightly to an annual 3.3 per cent, but the more important core rate is seen slowing to 4.7 per cent.

Analysts at Goldman Sachs see a downside risk to the numbers in part due to falling car prices, an outcome that might help keep the bond rally alive and kicking.

In China, the market is looking for further signs of deflation with annual consumer prices seen down around 0.5 per cent, and producer prices falling 4 per cent.

Any upside surprises would be a test for Treasuries which steepened markedly early last week ahead of a flood of new borrowing. In the event, a mixed payrolls report helped reverse much of the losses, particularly at the short tend.

Futures imply only a 12 per cent chance of a Federal Reserve rate hike in September, and 24 per cent for a rise by year-end.

Michael Gapen, an economist at BofA, cautioned the market was still expecting too much policy easing next year given the recent run of resilient economic data.

"We now expect a soft landing for the US economy, not the mild recession we had previously forecasted,” wrote Gapen.

"While the market implies between 120-160bps of Fed cuts in 2024 we look for only 75bps,” he added. "There’s simply less reason for the Fed to quickly pivot to rate cuts in 2024 when growth is positive and unemployment is low.”

As a result, the bank raised its year-end forecast for two-year and 10-year yields by 50 basis points to 4.75 per cent and 4 per cent, respectively.

Today, two-year yields were ticking higher again to 4.82 per cent, with the 10-year up at 4.06 per cent.

The pullback in yields took some steam out of the US dollar, which was idling at ¥141.90 and short of last week’s top of 143.89.

The euro held at US$1.0988, having bounced from a trough of US$1.0913 last week.

The dip in the dollar helped gold hold at US$1,941 an ounce XAU= after Friday’s rally from US$1,928.90.

Oil prices paused having rallied for six straight weeks amid tightening supplies. The 17 per cent climb in Brent combined with upward pressure on food prices from the war in Ukraine and global warming, is a threat to hopes for continued disinflation across the developed world.

Brent was up one cent at US$86.25 a barrel, while US crude gained 1 cent to US$82.83. — Reuters