Asian shares started the first trading day of the New Year on a steady footing on Tuesday, as investors returning after a holiday lull looked ahead to fresh trading catalysts from key economic releases later in the week.

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Risk appetite was strong after global shares ended 2023 with their biggest annual rise in four years, driven by the prospect that major central banks globally could begin easing rates this year in a major boost for consumers and businesses shackled by high borrowing costs.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.1 per cent in early trade but was still hovering near a five-month high it hit last week.

Australia's S&P/ASX 200 Index peaked at 7,632.70 points, its highest since August 2021.

Japan markets were closed for a holiday, which meant there was no cash trading of Treasuries either.

"We turn the page on another eventful year in markets, where central bank liquidity, a resilient U.S. economy, and the Fed engineering the highest real policy rates since December 2007, which allows for policy normalisation, all offering tailwinds for some robust returns for risky assets," said Chris Weston, head of research at Pepperstone.

"We could see equity just keep going on its merry ascent and we need to be open-minded to all possibilities.

"But with fund manager sentiment the most upbeat since January 2022, cash levels having been reduced and many other signs of broad exuberance, it feels like the distribution for risk is becoming more evenly distributed."

Market focus now turns to a slew of data due this week which will give further clarity on how much room there is for major central banks globally to ease monetary policy, and how soon those rate cuts could come.

Flash euro zone inflation figures are due on Friday, alongside the closely-watched U.S. nonfarm payrolls report.

In the currency market, the dollar held steady after clocking its first yearly loss since 2020 last week, weighed down by expectations of lower U.S. rates this year.

The euro eased 0.06 per cent to $1.1038, while the yen slid 0.4 per cent to 141.42 per dollar, struggling to make headway as investors remain on edge as to whether the Bank of Japan will exit negative interest rates this year.

CHINA CONONDRUM

In Asia, a private-sector survey on Tuesday showed China's factory activity expanded at a quicker pace in December due to stronger gains in output and new orders, but business confidence for 2024 remained subdued.

That contrasted with official data released over the weekend which showed China's manufacturing activity shrank for a third straight month in December and weakened more than expected, clouding the outlook for the country's economic recovery and raising calls for further policy support.

President Xi Jinping said on Sunday that China will enhance the positive trend of its economic recovery in 2024, and sustain long-term economic development with deeper reforms.

Still, a mixed bag of data weighed on Chinese assets, with the onshore blue chip index extending losses following Tuesday's release and was last 0.7 per cent lower. The index had slumped 11 per cent in 2023.

Hong Kong's Hang Seng Index (.HSI) lost nearly 1 per cent, after having ended 2023 with a yearly loss of close to 14 per cent, making it one of the world's worst performing stock markets.

"The divergence in manufacturing PMIs highlights how fragile the China recovery story is," said Christopher Wong, a currency strategist at OCBC.

"We continue to monitor if Chinese data shows signs of cracks or continue to point to signs of stabilisation."

Elsewhere, oil prices jumped on Tuesday, with Brent crude futures and U.S. WTI crude futures each rising more than 1 per cent.

Brent gained 94 cents to $77.98 a barrel, while U.S. crude rose 79 cents to $72.44.

Spot gold edged 0.14 per cent higher to $2,065.48 an ounce.