By Hideyuki Sano
TOKYO (Reuters) - Asian stock markets were subdued on Monday with U.S. markets closed on Friday but held near three-year highs on optimism about the U.S. economy, with investors now shifting their focus to corporate earnings.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed from Friday's high, staying near its 2011 peak after a rise of about 7 percent so far this year.
Japan's Nikkei average slipped about 0.3 percent from a 5-1/2-month high on Friday. European shares are expected to open steady to slightly higher. Both Germany's DAX and France's CAC40 are seen rising up to 0.1 percent.
The world's share prices rallied last week, with MSCI's All World share index hitting a record high, as U.S. employment growth smashed forecasts and unemployment fell to near a six-year low of 6.1 percent.
"The U.S. job data was undeniably strong, confirming a strong recovery in the economy," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.
Investors are now looking at whether record 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.
"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," Shimizu said.
Analysts polled by Reuters expect earnings growth of 6.2 percent for the second quarter, and a return to double-digits in the third and fourth quarters: 10.9 percent and 11.9 percent, respectively.
"While some people say the valuations of U.S. shares are becoming a bit expensive, I think there's further upside potential given U.S. interest rates are still low," Suzuki also said.
Despite the improvement in the job market, 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.
In addition, two other major central banks - the European Central Bank and the Bank of Japan - are committed to stimulus, keeping cheap money sloshing around possibly for years.
Still, following the job data, the U.S. bond yields jumped, with the rate-sensitive two-year yield staying near a 10-month high.
The two-year U.S. yield stood at 0.528 percent on Monday, after having risen to 0.532 percent on Thursday.
"The payroll data showed U.S. job market was tightening faster than the Fed's forecast. The jobless rate was falling not because people are giving up looking for jobs but because of rising payrolls. It's strong data for both hawks and doves alike," said Tomoaki Shishido, fixed income analyst at Nomura Securities.
Rising U.S. bond yields turned the table for the dollar in the currency market.
The dollar index held at 80.339, the highest level in a week and a half, having recovered from two-month low of 79.740 on Tuesday.
As a result, the euro was on the back foot at $1.3582 down from last week's six-week high of $1.3701 while the yen traded at 102.11 yen to the dollar, also off a six-week high of 101.235 set a week ago.
Bucking the dollar's firmness, the Indonesian rupiah jumped 1.5 percent to hit a five-week high of 11,680 rupiah to the dollar as local share prices rose ahead of the presidential election on Wednesday.
Former special forces chief Prabowo Subianto and Jakarta Governor Joko "Jokowi" Widodo are running neck-and-neck in opinion polls, with Jokowi seen as more market-friendly.
U.S. crude oil futures traded little changed at $103.97 per barrel, near Friday's low of $103.67, as Libya geared up to resume exports after the end of an almost year-long blockage by a rebel group of two major ports.
(Editing by Kim Coghill and Eric Meijer)