* European shares poised for second day of gains in 2017
* Australia shares close up 1.2 pct, China adds 1 pct
* Dollar strengthens on expectations of Fed rate hikes
* China expands yuan basket, raises scrutiny on FX purchases
* Oil advances as production cut pact takes effect
By Nichola Saminather
SINGAPORE, Jan 3 Global markets marched
confidently into 2017 on Tuesday, with Asian stocks extending
gains after European shares surged to their highest in a year
and the dollar resuming its climb after last week's stumble.
Oil, gold and base metal prices also advanced, as signs of
solid factory growth in China and Europe gave the global
manufacturing sector a solid boost heading into the new year.
European markets were also poised for a positive start on
Tuesday, with financial spreadbetter IG Markets predicting
Britain's FTSE 100 would open 0.2 percent higher, and
Germany's DAX and France's CAC 40 would start
the day up 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.6 percent as most regional markets
reopened after the New Year holiday. It ended 2016 with a 3.7
percent gain, its best year in four.
Japan was closed for an extended New Year holiday.
Australian shares were the best performers in the
region, closing up 1.2 percent. Hong Kong's Hang Seng
rose 0.7 percent.
In China, both the CSI 300 index and the Shanghai
Composite climbed 1 percent. China was Asia's worst
performing major stock market in 2016 with a 11.3 percent loss
in its worst year in five.
A private business survey showed China's factory activity
picked up more than expected in December as demand accelerated,
with output reaching a near six-year high.
"A year ago, the Chinese markets kept everyone on their
toes," said Jingyi Pan, market strategist at IG in Singapore,
referring to market turmoil in China that engulfed global
investors last January.
"I don't think that we will see a repeat given that the
global economy has a better foothold compared to a year ago,"
"Nevertheless, the market is always adjusting and will
likely recognise that the full year growth results and clarity
into (U.S.) President-elect Donald Trump's policies will
influence market direction in the near term."
The positive Chinese news lifted the Australian dollar,
which added 0.6 percent to $0.7230.
The dollar index, which tracks the greenback against
a basket of six global peers, rose 0.4 percent to 102.63, its
biggest one-day advance since Dec. 15, as the prospect of higher
U.S. interest rates kept sentiment bullish.
The dollar pulled back 0.1 percent to 117.33 yen on
Tuesday, after jumping almost 0.6 percent on Monday, its biggest
one-day gain in more than two weeks.
"Following a period of consolidation between now and late
January, we believe the USD will put on another 10 percent of
gains over the next eighteen months," said Richard Grace, chief
currency strategist at Commonwealth Bank of Australia.
U.S. S&P futures rose 0.5 percent during the Asian
day. Wall Street was closed for the New Year holiday on Monday.
With Britain and Switzerland also shut on Monday, Europe's
STOXX 600 index added 0.5 percent to hit its highest
level since Jan. 4, 2015.
That came on the heels of data showing manufacturers ramped
up activity at the fastest pace in more than five years in
The positive numbers failed to shake the euro out
of its doldrums, with the common currency slumping 0.6 percent
on Monday. It edged up 0.3 percent to $1.0486 on Tuesday.
Investors are keeping an eye on the Chinese yuan after the
central bank nearly doubled the number of foreign currencies in
a basket used to set the renminbi's value.
Starting on Jan. 1, the number of currencies in the CFETS
basket increased to 24 from 13, with new entrants including the
Korean won, the South African rand and the Mexican peso.
In its first fix since the change, the Chinese central bank
set the official yuan midpoint at 6.9498 per dollar on Tuesday,
compared with the previous close of 6.9467. It weakened further
to 6.9548 at 0640 GMT.
The renminbi posted its biggest annual loss since 1994 in
2016, with the dollar up almost 7 percent versus the Chinese
China's foreign exchange regulator said on Saturday that,
from Jan. 1, it would step up scrutiny on individual foreign
currency purchases and strengthen punishment for illegal money
outflows, although the $50,000 annual individual quota will
In commodities, oil prices rose after a historic deal
between OPEC and non-OPEC producers to reduce production took
effect on Jan. 1. Oil was the world's best-performing asset
class in 2016, with a gain of around 50 percent.
U.S. crude added 0.6 percent to $54.03 a barrel.
Global benchmark Brent jumped as much as 1.8 percent
before settling down to trade 0.6 percent higher at $57.15.
Gold also rose after initial losses, with the
precious metal adding about 0.5 percent to $1,157.40.
(Reporting by Nichola Saminather; additional reporting by Wayne
Cole; Editing by Kim Coghill)