Asian shares and the euro eased on Monday, but losses were kept in check after a report showed Chinese factory activity stabilising in April, alleviating worries about a sharp growth slowdown in the world's second-largest economy.

China's factory output ticked higher, new business rose from multi-month lows and export orders perked up, though not sufficiently for a private sector survey of purchasing managers to flag a return to expansionary territory, the HSBC Flash Purchasing Managers Index showed.

The HSBC flash PMI, the earliest indicator of China's industrial activity, recovered to 49.1 in April from a final reading of 48.3 in March, but still below the 50 level, signifying contracting economic activity, for the sixth month running.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> narrowed its loss to a 0.4 percent fall after the data from a 0.5 percent drop, while Hong Kong shares <.HSI> also trimmed losses to a fall of 0.5 percent from a 0.8 percent drop. Australian shares <.AXJO> were barely moved, standing down 0.2 percent.

The Australian dollar, which is sensitive to data from China, its biggest export market, briefly inched up to $1.0342 from $1.0335 before the data.

Japan's Nikkei average <.N225> was down 0.3 percent. <.T>

The Chinese PMI was in line with market consensus for a soft landing, that while growth is slowing, the slowdown has not accelerated sharply, giving some relief to those who had feared for a worse reading, said Tomomichi Akuta, senior energy researcher at Mitsubishi UFJ Research and Consulting in Tokyo.

This means the impact to commodities prices will be limited as demand will remain lacklustre, he added.

The euro retreated from two-week highs of $1.3225 against the dollar hit on Friday, standing down 0.2 percent at $1.3193. The euro rose 1.1 percent last week for its best weekly performance since the week of February 26.

Market players will now look to the euro zone's manufacturing activity report due later in the session.

We also expect euro area PMI to come marginally above consensus on Monday, helping markets keep the positive tone inherited from Friday, Barclays Capital analysts said in a research note.

IMF FIREPOWER BOOSTED

Market sentiment had stabilised before the Chinese data was released, after the International Monetary Fund secured new funding aimed at preventing the euro zone's debt crisis from spreading wider.

The contagion risk of Europe's debt problems was reduced slightly when the IMF secured $430 billion to erect a higher firewall in case the euro zone's debt crisis spreads.

Market reaction was muted to the result of the first round of the French presidential election on Sunday, which showed Socialist presidential candidate Francois Hollande marginally ahead of incumbent President Nicolas Sarkozy.

Polls conducted after the vote indicated Hollande would beat incumbent Sarkozy in the May 6 second-round ballot with about 53 to 56 percent of the vote.

Some analysts have cautioned Sarkozy's defeat on May 6 would weaken the current close cooperation between France and Germany in dealing with the euro zone debt crisis, while others said Hollande, if he wins, was unlikely to threaten Europe's general course for fiscal austerity.

Sarkozy's leadership abilities were instrumental in the euro zone's fight against debt and investors are obviously worried that an absence of this key figure may be detrimental to further progress, said Oh On-su, an analyst at Hyundai Securities.

U.S. EARNINGS SUPPORT

Strong corporate earnings boosted U.S. stocks while a surprisingly strong reading on Germany's Ifo business sentiment survey and reduced concerns about Spain's debt worries boosted risk sentiment on Friday.

About 81 percent of the S&P 500 companies that have reported so far have beaten expectations, according to Thomson Reuters data.

Brent crude steadied around $118.75 a barrel on Monday while U.S. crude eased 0.1 percent at $103.78.

Reflecting market doubts over the ability of European policy makers to contain the euro zone debt crisis as Spanish sovereign debt yields soared, redemptions from EPFR Global-tracked Europe Equity Funds accelerated for the fourth week running in mid-April.

Investors favoured Japan Equity Funds, supported by the prospect of more stimuli from the Bank of Japan, Fund tracker EPFR Global said.

Asian credit markets were cautious, with the spread on the iTraxx Asia ex-Japan investment-grade index widening a tad by 2 basis points.

(Additional reporting by Joonhee Yu in Seoul; Editing by Alex Richardson)