Asia stocks make cautious gains as weak data boosts stimulus hopes

Asian stocks eked out modest gains on Monday, amid a cautious market mood as investors pinned expectations on likely stimulus to support growth in the world's major economies, which showed further signs of struggle.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.1%.

Australian stocks edged up 0.1%, South Korea's KOSPI .KS11 rose 0.8% and Japan's Nikkei .N225 was up 0.5%.

The Dow .DJI rose 0.25% and the S&P 500 .SPX edged up 0.1% on Friday.

Global equity markets received a lift after China's central bank said on Friday it was cutting the amount of cash that banks must hold as reserves, releasing liquidity to shore up a slowing economy dogged by the Sino-US trade conflict.

Risk sentiment was also fortified as Fed Chairman Jerome Powell said Friday that the central bank will continue to act "as appropriate" to sustain the economic expansion in the world's biggest economy.

Broader stock market gains were tempered in the wake of lackluster economic data - US job growth slowed more than expected in August - although even this was seen as a positive factor for equities.

"Equities usually respond negatively to soft data. But the fact that the USjobs report shows the market is banking on stimulus, expecting the Fed to respond to economic weakness with rate cuts," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

Buoying market confidence on Monday were expectations the European Central Bank would cut interest rates on Thursday in one of the week's key events.

"The equity markets will receive a further lift and consolidate their recent gains if they can confirm the ECB's dovish stance," Ichikawa at Sumitomo Mitsui DS Asset Management said.

The dollar was capped as US yields came off two-week highs after Friday's soft USjobs report heightened expectations for a Fed rate cut.

The greenback traded at 106.975 yen JPY=, off the one-month peak of 107.235 scaled late last week.

The euro was steady at $1.1022 EUR=, weighed down ahead of Thursday's ECB policy decision and in distance of a 28-month low of $1.0926 set last week.

The Australian dollar AUD=D4, sensitive to shifts in broader risk appetite, hovered near a five-week peak of $0.6862 set on Friday.

The 10-year US Treasury yield US10YT=RR was at 1.5585% after bouncing to 1.6080 on Friday, its highest since Aug. 23.

Brent crude oil futures LCOc1 gained 0.5% to $61.85 per barrel. The contract had risen 1% on Friday after the Fed said it would act to sustain USeconomic growth and was on track to gain for the fourth day.