* Dollar index hits highest level since May 2017
* Nikkei up 0.6%, ex-Japan Asia up 0.23%
* China markets begin one-week holiday closure
* European shares struggle, Wall Street futures higher
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, Oct 1 (Reuters) - The dollar climbed to a 29-month
high on Tuesday as a blizzard of soft global data left the U.S.
economy as the only one still looking reasonably healthy.
European stocks .EU and the euro FRX/ both suffered
shaky mornings, after euro zone manufacturing data showed the
sharpest contraction in almost seven years. Australia's dollar AUD=D4 tumbled after its central bank
cut interest rates in its trade war-hit economy for the third
time this year. That dragged the neighbouring New Zealand dollar
NZD=D4 to a four-year low.
Emerging markets were also in the firing line. The South
African, Turkish, Russian, Indian and Mexican currencies fell
0.3% to 0.8% as the dollar charged to May 2017 highs. .DXY .N
EMRG/FRX
"On we go with the dollar," said Societe Generale strategist
Kit Juckes. "It is the pick of the major economies, and I don't
think anything is going to change (for the dollar) until the
economy slows.
"And if you are sensitive to global trade and sensitive to
manufacturing, you are having a very tough time at the moment,
there is no doubt about it."
The dollar's advance did slow before U.S. trading and
manufacturing data, but economic surprise indices published by
Citigroup .CESIUSD .CESIEUR underscored just why it was
looking so good.
The U.S. version is currency at its highest in nearly two
years, while Europe's has fallen to a 2019 low.
BUMPY BOND MARKETS
Wall Street, which is up almost 20% this year, looked set
for another positive start .N , but bond markets were grumbling
again.
A weak auction of Japanese government debt after news the
Bank of Japan will scale back some of its bond buying this month
underscored the lack of enthusiasm for the negative
interest rates that more and more countries seem to be heading
for.
That fed across to higher bond yields in major markets, with
10-year German, French and Spanish and U.S Treasury yields all
up 2 to 4 basis points. GVD/EUR
British government bonds also sold off as Prime Minister
Boris Johnson pitched new proposals for an amended Brexit
agreement that would remove the contested insurance policy for
the Irish border. "We had reached extreme lows (for bond yields) in August,
but now the central banks have delivered the easing markets were
expecting I think we needed this correction," said Pooja Kumra,
a European rates strategist at TD Securities.
HOT CHIPS
In Asia, the world's largest contract chipmaker, TSMC
2330.TW of Taiwan, jumped 2.9% to a record high.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.23%. Japan's Nikkei .N225 gained 0.6%
despite a six-year low in big business confidence. Australia's
benchmark .AXJO rose 0.8%, some of that after the central
bank's rate cut.
White House trade adviser Peter Navarro dismissed reports on
Monday that President Donald Trump's administration was
considering delisting Chinese companies from U.S. stock
exchanges as "fake news" China and the United States are due to resume trade talks
next week in Washington.
"Whether it was a fake news or not, it is becoming harder to
know exactly what the U.S. administration will be doing," said
Takashi Hiroki, chief strategist at Monex Securities.
The World Trade Organization cut its forecast for growth in
global trade this year by more than half on Tuesday and said
further rounds of tariffs and retaliation, a slowing economy and
a disorderly Brexit could squeeze it even more.
Back in the currency market, the euro reached $1.09 after
trading as low as $1.0877 EUR= , near a two-and-a-half-year
low.
The yen spent most of the day around 108.25 yen to the
dollar JPY= , not far from last month's low of 108.48.
Gold also fell to a two-month low as the stronger dollar
took its toll on metals markets. It was last trading at $1,468
per ounce XAU= .
Oil prices rebounded after data showed production at the
world's largest oil producers fell in the third quarter. It also
came after an 8% drop over the past few months.
U.S. West Texas Intermediate (WTI) crude CLc1 rose 0.6% to
$54.39 per barrel after falling 3.3% on Monday. Brent LCOc1
was up 0.8% at $59.70 a barrel.
"Any rallies, though, are likely to be met with plenty of
sellers as a slowing global economy and the recovery of Saudi
production outweigh any Middle East risk factors for now," said
Jeffrey Halley, a senior market analyst for Asia Pacific at
OANDA in Singapore.
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Economic surprise indexes https://tmsnrt.rs/2nlpaij
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