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Asian stocks sank on Monday as traders heavily pared back on bets for Federal Reserve rate cuts this year given a still-tight U.S. labour market, while a snap election call in France sparked wider political concerns and weighed on the euro.

Trading was thinned in Asia with Australia, China, Hong Kong and Taiwan out for public holidays, but MSCI's broadest index of Asia-Pacific shares outside Japan still slumped 0.46%.

U.S. futures eased slightly, with S&P 500 futures and Nasdaq futures down about 0.03% each, while the dollar was back on the front foot.

The halt in the global risk rally came on the back of Friday's nonfarm payrolls report which showed the U.S. economy created far more jobs than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labour market.

Futures now show roughly 36 basis points (bps) worth of cuts priced in for the Fed, down from 50 bps last week. The odds for an easing cycle beginning in September have also lengthened.

The latest developments come ahead of the Fed's policy decision on Wednesday, with U.S. inflation figures for May due just before that.

"It's going to be very difficult for the Fed to continue predicting three rate cuts this year," said Rob Carnell, ING's regional head of research for Asia-Pacific.

"Quite a few of the Fed speakers are talking about the possibility of just one (cut). While the most likely outcome is we'll see the three move to two, it is possible we just get a move to one."

U.S. Treasury yields similarly rose on Monday, reflecting the higher-for-longer U.S. rate expectations. [US/]

The two-year yield and benchmark 10-year yield each ticked up about 1 bp to 4.8826% and 4.4414%, respectively.

Against the dollar, the yen fell 0.1% to 156.87. The dollar index, which measures the greenback against a basket of six peers, firmed to 105.10.

Japan's Nikkei took advantage of the weaker yen and rose 0.42%.

The Bank of Japan (BOJ) also holds its two-day monetary policy meeting this week and could offer fresh guidance on how it plans to scale back on its massive bond purchases.

SNAP ELECTION

Over in France, President Emmanuel Macron on Sunday called snap legislative elections for later this month after he was trounced in the European Union vote by Marine Le Pen's far-right party.

Macron's shock decision set off a political earthquake in France, offering the far-right a shot at real political power after years on the sidelines and threatening to neuter his presidency three years before it ends.

The euro tumbled to a one-month low in the wake of the announcement amid growing uncertainty over Europe's future political direction. It was last 0.25% lower at $1.07735.

Futures similarly fell, with EUROSTOXX 50 futures losing 0.38% while FTSE futures slid 0.7%. French bond futures shed 0.2%.

"Macron's decision, seen as a calculated risk, comes as he struggles with a parliamentary majority, making legislative progress difficult," said Shier Lee Lim, Convera's APAC lead FX and macro strategist.

"We remain bearish on the (euro) in the short term."

In commodities, oil prices last traded higher, reversing slight falls from earlier in the session owing to a stronger dollar.

Brent crude futures gained 0.13% to $79.72 a barrel, while U.S. West Texas Intermediate crude futures ticked up 0.16% to $75.65 per barrel. [O/R]

Spot gold rose 0.18% to $2,296.65 an ounce. [GOL/]