LONDON (Reuters) - A selloff in Europe set the tone for global markets on Monday as France's decision to call a snap election weighed on everything from the euro to banking stocks and government bonds.

Asia shares fell and U.S. stock futures pointed to a weak open on Wall Street, with an event-packed week that includes the release of U.S. inflation data as well as Federal Reserve and Bank of Japan meetings adding to the cautious mood.

For now, it's the prospect of fresh political uncertainty in the euro zone's second biggest economy weighing on sentiment after far-right gains in European Parliament elections on Sunday prompted a bruised French President Emmanuel Macron to call a snap national election.

The euro fell to a one-month low against the dollar, European stocks slipped 0.6%, euro zone bank stocks tumbled 2% while government bond yields in France and Italy jumped.

"The market moves are all about what we are seeing in a European context - and news from France has caused a risk premium around European assets," said BlueBay Asset Management chief investment officer Mark Dowding.

"It could swing a bit further but we need to remind ourselves this is a parliamentary election not a presidential election in France."

French bank Societe Generale was last down more than 5% and BNP Paribas more than 4% as investors worried their funding costs may increase if French sovereign borrowing becomes more expensive amid higher spending, bankers said.

France's 10-year government bond yield jumped 8 basis points to 3.19%, while Italian borrowing costs also rose.

A BIG WEEK

Trading was thinned in Asia with Australia, China, Hong Kong and Taiwan observing public holidays.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3%, global shares were down 0.15% and U.S. equity futures were also broadly lower.

The global risk rally came to a halt after Friday's nonfarm payrolls report 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 U.S. rate cuts priced in this year, down from 50 bps last week. The odds for an easing cycle beginning in September have also lengthened.

The Fed's next policy decision comes on Wednesday, with U.S. inflation figures for May due just before that.

"With inflation still firmly above the 2% target, the Fed has more work to do to tame these forces and will not be in a position to deliver a rate cut when its committee meets next week," said David Arnaud, a senior Fund Manager, fixed income, at Canada Life Asset Management.

He said that with recent data pointing to a cooling of the economy, the Fed should be able to subtly adjust its message around upcoming rate cuts with a quarter point cut in the final three months of the year still likely.

U.S. Treasury yields, which move inversely to prices, 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 two bps to around 4.89% and 4.45%, respectively.

Against the dollar, the yen dipped 0.1% to 156.93. The dollar index, which measures the greenback against a basket of six other major currencies, firmed to 105.17.

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

In commodities, oil prices edged up, aided by hopes of rising fuel demand this summer, though gains were capped by the stronger dollar.

Brent crude futures gained 0.4% % to $79.91 a barrel, while U.S. West Texas Intermediate crude futures ticked up 0.2% to $75.71 per barrel. [O/R]

Spot gold rose 0.13% to around $2,296 an ounce. [GOL/]