* 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 share futures at highest since June 2018
By Marc Jones
LONDON, Oct 1 (Reuters) - The dollar bulldozed almost everything in its path on its way 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 in reasonable health.
European stocks .EU and the euro FRX/ both suffered shaky starts as euro zone manufacturing data showed the sharpest contraction in almost seven years, but it was by no means the only alarm bell ringing. dollar AUD=D4 had tumbled overnight after its central bank cut interest rates in its trade war-hit economy for the third time this year. That in turn dragged the neighbouring Kiwi dollar NZD=D4 to a 4-year low.
"On we go with the dollar," said Societe Generale (PA:SOGN) 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."
"If you are very sensitive to global trade and sensitive to manufacturing you are having a very tough time of it at the moment, there is no doubt about it."
The dollar index .DXY against a basket of major currencies rose 0.2% to 99.585, its highest level since May 2017.
Bond markets were also grumbling after a weak auction of Japanese government debt underscored the lack of enthusiasm for the negative interest rates that more and more countries will be heading towards if economies and inflation stay weak.
That worry fed across to higher bond yields across major markets, with 10-year German, French and Spanish and U.S Treasury yields all up 2 to 4 basis points. GVD/EUR
Economic surprise indexes published by Citigroup (NYSE:C) for the United States and Europe .CESIUSD , .CESIEUR showed an increased divergence. The former is at its highest in nearly two years; the latter has fallen to a 2019 low.
HOT CHIPS
It wasn't all gloomy though. In Asia, the world's largest contract chipmaker TSMC 2330.TW of Taiwan jumped 2.9% to hit an all-time high.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had inched up 0.23% while Japan's Nikkei .N225 rose 0.6% and Australia's benchmark .AXJO by 0.8%, some of that coming after the central bank rate cut.
White House trade adviser Peter Navarro had also dismissed reports on Monday that the Trump administration was considering delisting Chinese companies from U.S. stock exchanges as "fake news" 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.
China and the United States are due to resume high-level trade talks next week in Washington.
Back in the currency market, the euro traded at $1.0888 EUR= , having slipped to a near 2 1/2-year low.
The yen was slightly weaker at 108.24 yen to the dollar JPY= , not far from last month's low of 108.48 too.
Gold also fell to a two-month low as the stronger greenback took its toll on metals markets, It was last trading at $1,468.50 per ounce XAU= .
Oil prices rebounded, however, after data showed production at the world's largest oil producers fell in the third quarter. It also came after a sizeable 8% drop over the last few months.
U.S. West Texas Intermediate (WTI) crude CLc1 rose 1.2% on to $54.28 per barrel after falling 3.3% on Monday. Brent LCOc1 was up 1% at just under $60 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," Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA in Singapore, said.