LONDON European shares fell on Monday, unable to maintain the momentum that took Asian equities to two-month highs, as investors said a rebound in stocks seemed tired and looked ahead to a European Central Bank meeting expected to deliver more stimulus.
U.S. shares were also expected to open lower, with futures suggesting they would open down 0.4-0.6 percent.
The euro tumbled against the dollar before Thursday's ECB meeting at which policymakers are expected to cut interest rates further into negative territory.
Sentiment in commodity markets was buoyant, however, with oil powering ahead and iron ore surging on expectations Chinese steel mills will implement short-term output cuts.
Chinese shares rose for a fifth consecutive day as reassurances by the country's leaders that the economy would remain on a sound footing soothed investors' concerns.
The pan-European FTSEurofirst 300 index, which rose 0.7 percent on Friday after a forecast-beating U.S. jobs report, fell 0.9 percent. It remains up around 7 percent this year. Britain's FTSE 100 fell 1 percent.
"Momentum is fading again and, combined with persistently weak inflation readings, should ensure a comprehensive package of stimulus measures," Peel Hunt strategist Ian Williams said, referring to the ECB meeting, which is also expected to deliver an extension of its asset-purchase programme.
In their first reaction to the U.S. data, Asian shares gained. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent to its highest since Jan. 4. It has recouped about 80 percent of its 2016 losses.
Japanese shares snapped a four-day winning streak as the yen strengthened and investors took profits on last week' sharp rally. The Nikkei 225 index closed down 0.6 percent.
Chinese shares rose after Prime Minister Li Keqiang spelled out on Saturday a new five-year economic plan, which included an average growth target of 6.5 to 7 percent and a moderate increase in the fiscal deficit to 3 percent of GDP this year.
The CSI300 index of the biggest listed companies in Shanghai and Shenzhen closed up 0.4 percent and the Shanghai Composite rose 0.9 percent.
Friday's payrolls data showed 242,000 jobs were created last month and assuaged fears the U.S. economy could be headed into recession. It also revived prospects of further Federal Reserve interest rate hikes this year, something markets had priced out.
Prices still suggest no chance of a hike this month, but a 50 percent chance of a June hike, according to CME Fedwatch.
An unexpected fall in average earnings soothed concerns the Fed would be in a hurry to raise interest rates, however.
The data and its implications for the economy helped lift oil prices, which were also supported on Monday by a fall in the number of active U.S. rigs to its lowest since 2009.
Brent, the global benchmark for crude prices, was up 54 cents at $39.26. It has risen more than a third from this year's lows, though analysts caution that the glut that saw it fall 70 percent from June 2014 levels remains.
Iron ore futures surged almost 20 percent to around $60 a tonne in anticipation of a short-term output cut in China's top steel-producing region to improve air quality.
The dollar rose 0.3 percent against a basket of currencies, with the euro off 0.5 percent at $1.0946.
"There is still a higher likelihood that they over-deliver and the euro goes down to around $1.08, maybe the high $1.07s," said Ulrich Leuchtmann, head of currencies research at Commerzbank in Frankfurt.
"Clearly there will be a much bigger move if they do not deliver."
The yen, often sought when risky assets are out of favour, bucked the trend and rose 0.2 percent to 113.58 per dollar.
German 10-year Bund yields fell 2.5 basis points to 0.21 percent. U.S. 10-year yields, which rose after Friday's jobs data, were up 1.7 bps at 1.90 percent.
Gold held around $1,270 an ounce, just below last week's 13-week high, on weak shares and the U.S. rate outlook.
(Additional reporting by Hideyuki Sano in Tokyo, Marius Zaharia and Patrick Graham in London; Editing by Catherine Evans)
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