By Wayne Cole

SYDNEY, Aug 26 (Reuters) -Asian shares crept cautiously higher on Monday, while the dollar and bond yields were on the wane ahead of inflation data that investors hope will pave the way for rate cuts in the United States and Europe.

Oil prices climbed 0.7% after Israel and Hezabollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated.

Brent LCOc1 rose 51 cents to $79.53 a barrel, while U.S. crude CLc1 added 50 cents to $75.33 per barrel. O/R

Investors are also anxiously awaiting earnings from AI darling Nvidia NVDA.O on Wednesday to see if it can match the market's uber-high expectations.

The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500's 17% year-to-date gain.

"Nvidia will beat consensus expectations, they always do, but investors are so ingrained in seeing revenue come in $2 billion plus above the analysts' consensus or we could easily see a sell the news event," said Chris Weston, head of research at broker Pepperstone.

That means Nvidia would have to report sales of $30 billion or more and guidance for Q3 of $33 billion or above, he added.

Early Monday, S&P 500 futures ESc1 and Nasdaq futures NQc1 were down 0.1%. .N

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.4%, after rising 1.1% last week, while South Korea .KS11 rose 0.3%.

Japan's Nikkei .N225 eased 0.7% as a stronger yen pressured exporter stocks.

The yen had jumped on a broadly weaker dollar on Friday after Federal Reserve Chair Jerome Powell said the time had come to start easing policy and emphasised that the central bank did not want to see further weakening in the labour market.

"Importantly there was a notable absence of caveats such as 'gradual/gradualism' as used by other Fed officials," noted Tapas Strickland, head of market economics at NAB.

"The jobs report on September 6 is clearly important as Powell is willing to cut rates to ward off downside risks to employment and to maintain a strong labour market," he added. "In summary, Powell has increased the chances of a soft landing."

LOTS OF CUTS COMING

Figures on U.S personal consumption and core inflation are due on Friday, along with a flash reading on European Union inflation. Analysts generally assume the data will be benign enough to allow for rate cuts in September.

Fed fund futures 0#FF: are fully priced for a quarter-point cut at the Sept. 18 meeting, and imply a 36% chance of an outsized move of 50 basis points. The market also has 103 basis points of easing priced in for this year and another 122 basis points in 2025. FEDWATCH

"We continue to expect the FOMC to deliver an initial string of three consecutive 25bp cuts at the September, November, and December meetings," said analysts at Goldman Sachs.

"Our forecast rests on our assumption that the August employment report will be stronger than the July report, but we continue to think that if instead the August report is weaker than we expect, then a 50bp cut would be likely."

Markets are also fully priced for a quarter-point cut from the European Central Bank next month, and a total 163 basis points of easing by the end of 2025. 0#ECBWATCH

Yields on two-year Treasuries US2YT=RR stood at 3.91%, having fallen almost 10 basis points on Friday, while 10-year yields US10YT=RR held at 3.79%. US/

The dollar slipped a further 0.3% to 143.97 yen JPY=EBS, having fallen 1.3% on Friday. The euro was up at $1.1190 EUR=EBS and just off a 13-month top, while the Swiss franc CHF= held firm at 0.8472 per dollar. USD/

A softer dollar combined with lower bond yields to underpin gold at $2,516 an ounce XAU=, and near an all-time peak of $2,531.60. GOL/

Reporting by Wayne Cole;
Editing by Shri Navaratnam

To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA