* Dollar softens after jobs data alters view on early Fed stimulus cut
* Wall Street seen holding on to recent gains
* NZ dollar plunges on food safety scare
* Aussie dollar hits 3-year low ahead of likely rate cut
By Richard Hubbard
LONDON, Aug 5 (Reuters) - Evidence of modest global growth coupled with growing confidence that the U.S. Federal Reserve will stick with its stimulus programme lifted European shares and sent the dollar lower on Monday.
Wall Street was poised to open unchanged, holding on to record levels hit last week, and European shares traded near a two-month high as markets judged a still-weak U.S. labour market - as shown by last week’s soft jobs report - would delay moves by the Fed to trim its bond purchases next month.
“The bulls are clearly in control of the market, and there’s no sign that will change,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
The New Zealand dollar slumped to a one-year low following a milk powder contamination scare involving Fonterra, the world’s biggest dairy products exporter, that threatened the nation’s $9 billion dairy export trade.
A softer session for equities in Asia, where Japan’s Nikkei index fell 1.2 percent and shares in South Korea, Australia and Singapore all slipped, kept the MSCI world equity index little changed.
As investors trimmed dollar holdings on the jobs numbers, the U.S currency fell 0.4 percent to 98.54 yen. The euro dipped to $1.3260, shedding some of Friday’s 0.5 percent gain versus the dollar.
The outlook for the global economy improved slightly with a batch of purchasing manager’s surveys covering thousands of companies worldwide, which showed China recovered some momentum in July and activity in the euro zone expanding for the first time in 18 months.
It is still unclear if the recession-hit euro area has turned the corner, but the data pointed to more sustainable strength in Britain, where the services sector is growing at its fastest pace in more than six years.
The equivalent report due later in Monday from the United States, the main driver of global growth, is also expected to show activity picked up in non-manufacturing companies.
The New Zealand dollar hit a low of $0.7670, its weakest since June 2012 after New Zealand dairy exporter Fonterra said at the weekend it had found bacteria in some products that could cause botulism.
“It’s a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured,” said Chris Tennent-Brown, FX economist at the Commonwealth Bank in Sydney.
The Australian dollar also slipped sharply, to a three-year low of $0.8848, after the country’s retail sales data fell short of market forecasts and reinforced expectations of further rate cuts by the country’s central bank (RBA).
In the debt market, U.S. 10-year Treasury notes yielded 2.61 percent, below Friday’s high of 2.75 percent, which was just under a two-year high of 2.755 percent hit in July.
German government bonds also held on to Friday’s gains to hold steady at 1.65 percent, but investors focused more on developments in Italy, where political risks were easing.
Former Prime Minister Silvio Berlusconi cooled concerns that his conviction for tax fraud would wreck the shaky coalition ruling Italy by backing the government of Enrico Letta at a protest rally in Rome on Sunday.
Ten-year Italian government bond yields fell 2.5 basis points to 4.26 percent.
For commodity markets, the latest growth data was seen as not strong enough to lift demand, especially from leading oil and metals consumer China.
Brent crude initially rose above $109 a barrel as supply disruptions by Middle East and North Africa producers lifted prices, but it later fell over $1 per barrel to a low of $107.95. Copper prices also edged lower.
“Euro zone services data were mixed, with Germany not ideal, and China data were not impressive either,” said Andrey Kryuchenkov, oil and commodities strategist at VTB Capital. “Hence you see ... extended profit-taking from Friday.”
Gold got a lift from uncertainty over the timing of the Fed’s scaleback of its quantitative easing policy to trade just above $1,300 an ounce.