By Eric Burroughs

HONG KONG, CHINA - Asian stocks dipped slightly on Friday and the dollar edged up after a disappointingly big
drop in U.S. employment prompted investors to pull back from commodities and resource-linked shares.

But the equity market decline across Asia was limited as the report showing that U.S. companies slashed nearly half a million jobs in June did not shake hopes that a slow recovery is under way.

The Australian dollar, whose 12 percent surge against the U.S. dollar this year has been closely tied to the four-month rally in stocks, bounced back from a slide the previous day as the U.S. payrolls report had limited fallout.

Analysts at Rabobank said the U.S. jobs report was a "reality check" for investors who had become overly optimistic about how quickly the global economy could recover from its deepest recession in decades.

Oil and copper extended their slide. U.S. crude struck a one-month low and was trading below US$67 a barrel. Government bonds jumped, with the benchmark Japanese 10-year yield touching a three-month low.

"U.S. jobs data dented brewing hopes of an economic turnaround, but share losses were limited as investors here did not necessarily take it as a sign of a further slowdown of global economies," said Won Jong-hyuck, a market analyst at SK Securities in Seoul.

The MSCI index of Asia-Pacific shares outside Japan trimmed losses to trade in the evening almost flat, but the regional gauge has been subdued in the first three trading days of the third quarter.

In the quarter to June, the MSCI benchmark for Asian shares surged 32 percent - its biggest quarterly gain since 1993 - on investor hopes that Asia's emerging economies would help lead the global economy out of the doldrums.

Data from fund tracker EPFR Global showed that global emerging markets received a record amount of funds in the
second quarter.

China-focused funds took in US$3.8 billion, while Asian funds excluding Japan took in more than US$23 billion.

Japan's Nikkei average shed 0.6 percent, dragged down by a 5 percent slide in Seven & I Holdings when the operator of department stores and supermarkets reported an unexpected drop in quarterly profit. Other Japanese retailers also lost ground.

The pull-back in energy prices knocked down shares of oil distributor Nippon Oil by 2 percent.

Asian stocks held up relatively well after the U.S. S&P 500 slid 2.9 percent on the jobs data.

U.S. markets are closed on Friday in observance of the Independence Day holiday on Saturday.

Indian shares made the most gains in the region with a 1.7 percent bounce ahead of Monday's federal budget that is
expected to unveil the government's economic reform plans.

Chinese stocks rose 0.9 percent and scored a 5.5 percent weekly gain, the best in eight weeks, with coal and property shares strong as brisk lending growth and rising power output boosted optimism over the economy.

Hong Kong shares, which spent most of the session in the red after the bleak U.S. jobs report, clawed back 0.1 percent by the end of trade, snapping a three-day losing spell, as Chinese insurers climbed, tracking strong gains on the mainland markets.

Korean shares rose 0.6 percent, but Australia and Singapore fell about a percent while Taiwan was flat.

The dollar edged up as investors favoured the greenback as a safe haven while positions in riskier currencies and assets were cut.

The dollar index, a gauge of its performance against six major currencies, rose a tad.

The Australian dollar climbed nearly 1 percent to US$0.7987 after a nearly 2 percent tumble the previous day.

The worries about the recovery outlook added fuel to gains in government bonds.

The 10-year JGB yield feel as much as 4 basis points to 1.320 percent, with some buying after an enlarged auction of the maturity found solid demand on Thursday to help pay for stimulus spending.

Japan's low yields have prompted domestic investors to go abroad in search of higher returns.

Data from the Ministry of Finance on Thursday showed domestic investors snapped up 1.53 trillion yen (US$16 billion) of foreign bonds in the weekend ending June 27, the biggest such weekly purchases in four years. Analysts said those purchases were mainly concentrated in U.S. Treasuries.

Benchmark U.S. Treasury yields are about 2.2 percentage points above JGB yields, holding near their widest gap in eight months and making them attractive to Japanese investors.

Japanese household investors have also been hefty buyers of new mutual funds targetting foreign assets, keeping yen gains in check as the money flows abroad. --REUTERS