*

Asian stock markets : https://tmsnrt.rs/2zpUAr4

*

Nikkei slips 1%, S&P 500 futures edge higher

*

Focus on U.S. and China inflation data this week

*

Treasury yields inch up after Friday's rally

By Wayne Cole

SYDNEY, Aug 7 (Reuters) - Asian share markets started in a cautious mood on Monday after a mixed U.S. jobs report sparked a rally in beaten-down bonds, but new hurdles lay ahead in the shape of U.S. and Chinese inflation figures due later this week.

MSCI's broadest index of Asia-Pacific shares outside Japan were a fraction lower in thin trade, after losing 2.3% last week.

Japan's Nikkei slipped 1.0% to test its July low. A summary of the last Bank of Japan meeting showed members felt making yield policy more flexible would help extend the life of its super-easy stimulus.

Going the other way, S&P 500 futures added 0.2% and Nasdaq futures 0.3% in early trade.

With roughly 90% of S&P 500 earnings reported, results are 4% better than consensus estimates with more than 79% of companies beating the Street. Results due this week include Walt Disney and News Corp.

Data on U.S. consumer prices due Wednesday are forecast to show headline inflation picking up slightly to an annual 3.3%, but the more important core rate is seen slowing to 4.7%.

Analysts at Goldman Sachs see a downside risk to the numbers in part due to falling car prices, an outcome that might help keep the bond rally alive and kicking.

In China, the market is looking for further signs of deflation with annual consumer prices seen down around 0.5%, and producer prices falling 4%.

Any upside surprises would be a test for Treasuries which bear steepened markedly early last week ahead of a flood of new borrowing. In the event, a mixed payrolls report helped reverse much of the losses, particularly at the short tend.

Futures imply only a 12% chance of a Federal Reserve rate hike in September, and 24% for a rise by year end.

Michael Gapen, an economist at BofA, cautioned the market was still expecting too much policy easing next year given the recent run of resilient economic data.

"We now expect a soft landing for the U.S. economy, not the mild recession we had previously forecasted," wrote Gapen.

"While the market implies between 120-160bps of Fed cuts in 2024 we look for only 75bps," he added. "There's simply less reason for the Fed to quickly pivot to rate cuts in 2024 when growth is positive and unemployment is low."

As a result, the bank raised its year-end forecast for two-year and 10-year yields by 50 basis points to 4.75% and 4% respectively.