Asian shares fell on Monday as a sharp slowdown in U.S. jobs growth raised concerns about the strength of the world's largest economy, prompting investors to curb risk exposure ahead of more U.S. data and earnings as well as figures from China this week.
Friday's data showed U.S. payrolls grew by 120,000 in March, far below the expected gain of 203,000 jobs for the smallest rise since October, keeping the door open for the Federal Reserve to provide more monetary support to the fragile economy.
Industrial commodities such as copper and oil fell on growth worries while the potential for more Fed easing helped gold rebound but pressured the dollar.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> slipped as much as 0.8 percent to near a four-week low hit last week. U.S. stock futures fell more than 1 percent on Friday after the jobs data. <.N>
Japan's Nikkei average <.N225> closed down 1.5 percent, after sliding as much as 1.6 percent to a one-month low earlier, with a firmer yen also dampening sentiment. <.T>
Price actions after the jobs data show that markets had been excessively pricing in the U.S. economic recovery and must now fill the gap between the reality and prices built on perceived strength of the economy, said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co.
Markets will continue to focus on global data this week to gauge what price levels would match the real economy, he said.
U.S. payroll growth slows: http://link.reuters.com/wej57s
Graphic on US unemployment: http://link.reuters.com/zej57s
Iran sanctions graphic: http://link.reuters.com/qeh85s
China CPI and PPI data: http://link.reuters.com/tek57s
Some Asian markets, including Australia and Hong Kong, and European markets remain closed on Monday.
CHINA IN FOCUS
China's annual inflation rate hit 3.6 percent in March, with volatile food prices leading a temporary rebound that pushed costs above expectations but left intact the view that Beijing has the flexibility to ease monetary policy to support growth.
Producer prices eased 0.3 percent on the year, against a 0.2 percent fall forecast, sparking concerns that it indicated weakening demand.
My concern is not about CPI, it's about PPI, said Ren Xianfang, an analyst at IHS Global Insight in Beijing. Since the final quarter of last year, it has been falling towards deflationary territory and now it has been realised. This will affect our outlook about how fast the economy is recovering.
Data due this week from China, the world's second-largest economy after the United States, also include trade due on Tuesday and first-quarter gross domestic product due on Friday.
China's economy likely grew at its slowest pace in nearly three years between January and March at just 8.3 percent, still well above the government's full-year growth target of 7.5 percent and pointing to a soft landing of the economy.
DEMAND OUTLOOK SOFTENS
Shanghai copper fell as much as 0.9 percent earlier on Monday before paring some losses on hopes appetite from top copper consumer China will remain with further monetary easing.
Oil was weighed by demand growth concerns, as well as easing worries about supply disruptions. Brent crude slipped as much as $1.26 to $122.17 a barrel from Thursday's settlement after Iran agreed to resume talks with top world powers this week on the country's nuclear programme, raising hopes of a peaceful end to the standoff that has rattled the oil market for months.
U.S. oil shed as much as $1.44 from Thursday's settlement to $101.87 a barrel. Oil markets were closed on Friday due to Good Friday.
Spot gold rose 0.9 percent at $1,643 an ounce.
The dollar extended its loss against the yen on Monday to hit a one-month low of 81.19 yen, but was up 0.2 percent against the euro at $1.3067.
The dollar may remain pressured as currency speculators trimmed their long positions in the latest week, while net shorts on the yen shrank slightly from the previous week. To be short a currency is to bet it will decline in value, while being long is a view its value will rise.
Barclays Capital analysts said it was too early to conclude U.S. jobs growth has entered a falling trend as cyclical sectors such as manufacturing and leisure remained relatively strong.
For more clues, U.S. markets will focus on the earnings season, with earnings likely rising 3.2 percent for the first quarter. But that figure dwindles to 1.8 percent on the year when excluding Apple Inc
(Additional reporting by Koh Gui Qing in Beijing; Editing by Sugita Katyal, Jonathan Hopfner and Himani Sarkar)