SYDNEY: Asian stocks inched higher on Monday as investors grew more confident about a September U.S. rate cut, while the euro grappled with political uncertainty as French elections pointed to a hung parliament.

In France, a leftist alliance unexpectedly took top spot ahead of the far right, a major upset that was set to prevent Marine Le Pen's National Rally (RN) from running the government.

The loss of the far right was something of a relief for investors, though they also have concerns the left's plans could unwind many of President Emmanuel Macron's pro-market reforms.

"It will be difficult for France to form a government and as the most likely potential outcome is now some arrangement between parts of the left and Macron," said Holger Schmiedling, chief economist at Berenberg.

"This could mean some reform reversals rather than further reforms. The outcome I would say is less bad than could have been the case. It could have been much worse."

The single currency dipped a fraction in reaction to $1.0828, having been as high as $1.0843 on Friday when a soft U.S. jobs report undermined the dollar.

The euro was also down 0.25% on the Swiss franc at 0.9680 francs, but held firm on the yen at 174.00. The dollar stood at 160.70 yen, just off its recent top of 161.86.

EUROSTOXX 50 futures and FTSE futures both edged 0.1% higher. French 10-year bond futures dipped 23 ticks, or a modest 0.21%.

Equities were supported by hopes that a U.S. policy easing was getting closer. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1%, after reaching a two-year top last week.

Japan's Nikkei held steady near record highs. Chinese blue-chip index eased 0.6%, while bond yields rose as the central bank launched new money market operations.

S&P 500 futures and Nasdaq futures were both nearly flat. Earnings season kicks off later this week when Citigroup, JP Morgan and Well Fargo all report.

Investors took Friday's jobs report as adding to the case for a September rate cut from the Federal Reserve, with futures now implying a 77% chance of a move.

Markets also have 53 basis points of easing priced in for this year, up from around 40 basis points a month ago.

"Three-month payroll growth fell sharply to +177k from +249k as previously reported, driven by 111k of downward revisions," wrote analysts at Goldman Sachs.

"We continue to expect the FOMC to deliver its first cut in September, followed by quarterly cuts to a terminal rate of 3.25-3.5%."

Treasuries rallied on the report, with 10-year yields down at 4.30%, having been as high as 4.4930% early last week.

Fed Chair Jerome Powell will have a chance to offer his outlook when he appears before Congress on Tuesday and Wednesday, while several other Fed officials are speaking this week.

The main economic event will be the U.S. consumer price report on Thursday, where headline inflation is expected to slow to 3.1%, from 3.3%, with the core steady at 3.4%.

German inflation data are out the same day, while China releases consumer prices and trade figures this week.

In commodity markets, gold held near one-month highs at $2,385 an ounce.

Oil prices slipped as the market waited to see what impact Hurricane Beryl might have on supplies from the Gulf of Mexico.

Brent eased 14 cents to $86.40 a barrel, while U.S. crude fell 29 cents to $82.87 per barrel.

 - Reuters