Caution rules on world economy

By Wayne Cole

SYDNEY (Reuters) - Markets got off to a hesitant start Monday as investor doubts on the staying power of a global recovery kept Asian stocks soggy and currencies subdued ahead of a much-expanded Group of Eight meeting this week.

Japan's Nikkei .N225 slipped 1.58 percent to 9,661.27, while the MSCI index of Asia ex-Japan eased 1.1 percent to 319.61

.MIAPJ0000PUS.

The air of caution kept the U.S. dollar and bonds supported as safe-havens, while pressuring commodity prices. Crude oil futures were down at five-weeks lows of $65.00 a barrel.

Investors were still smarting from last week's dismal U.S. payrolls report which put a question mark over the recovery there, and thus across the globe.

"The payrolls result doesn't spell the end of the global sharemarket recovery," said Craig James, chief economist at CommSec in Sydney, noting that forward-looking indicators were more encouraging.

One such should be the ISM reading of the giant U.S. services sector due later Monday which is expected to show a rise to 46.0 in June, from 44.0 the month before.

"But what the payrolls result does signify is that the U.S. economic recovery will be U-shaped, and very likely to be a very flat U," said James.