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STOXX down 0.1%, S&P 500 futures inch up

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CSI300 up 0.7%

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China bond yields hit record lows

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Korea rebounds

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Australia c.bank strikes dovish tone, weighing on currency

(Updates after European morning trading)

By Tom Westbrook and Alun John

SINGAPORE/LONDON, Dec 10 (Reuters) - European shares

drifted on Tuesday, failing to build on the previous day's gains

driven by China stimulus hopes, which only generated limited

traction in Asia, while the Australian dollar slid as the

central bank hinted rate cuts were finally near.

The main scheduled events of the week are still to come,

however, with U.S. inflation data due on Wednesday, and a

meeting by the European Central Bank on Thursday. With an ECB

rate cut all but certain, investors will be watching for clues

about its policy path.

Also top of mind for investors in emerging markets was

Brazilian President Luiz Inacio Lula da Silva undergoing surgery

in Sao Paulo to drain a bleed on his brain linked to a fall at

home in October, according to a medical note published by the

government.

MSCI's world share index was down 0.14% with

Europe's broad Stoxx 600 index off 0.1%, walking back some of

its gains from the previous day when news from China's Politburo

drove hopes of more accommodative policy in the world's

second-largest economy.

Chinese state media outlet Xinhua reported on Monday that

top Communist Party officials had shifted the monetary policy

stance from "prudent" to "moderately loose" ahead of the

target-setting Central Economic Work conference this week,

mirroring their response in previous crises.

Chinese bluechips,, which had closed before

Monday's announcement, rose 0.7% on Tuesday as did stocks in

Japan and Korea, the latter up 2.4% helped by authorities'

vowing measures to stabilise markets in a bid to calm investors

spooked by political turmoil.

Though Hong Kong stocks, which had a chance to react to the

news on Monday, dipped on Tuesday, and the runaway rally in

Chinese bonds, which extended on Tuesday to drive 10-year

and 30-year yields to record lows,

suggests some investors doubt the pledges are going to lift

long-run growth in China.

Soft Chinese trade data on Tuesday didn't help.

The Politburo meeting announcement, as it related to the

policy stance, "adopted (the) strongest tone in decades," said

Chen Shujin, head of China financial and property research at

Jefferies.

However, she added: "We still see the market repeating the

pattern from the beginning of the year, driven by expectation on

potential stimulus, and dragged by lower-than-expected

policies."

Overnight, the S&P 500 fell 0.6% and futures

were steady in the run up to Tuesday's open.

A 2.5% drop for chip titan Nvidia ( NVDA ), which edged a

fraction lower still in after-hours trade following China

opening an antitrust investigation, weighed on the mood.

CENTRAL BANKS

Elsewhere, the Reserve Bank of Australia, which has yet to

join the global rate cutting cycle, left its cash rate unchanged

at 4.35% as expected.

However, the Australian dollar fell 0.7% to $0.6394

as Governor Michele Bullock left the door open to a cut in

interest rates as early as February.

"The currency must now count on soft U.S. CPI tomorrow for

buyers to return," said Kenneth Broux, head of corporate

research FX and rates at Societe Generale.

That U.S. price data is the most important piece of global

economic data this week. It is the last scheduled event that

could possibly disrupt market expectations that the Federal

Reserve will cut rates at its meeting next week.

Core inflation is expected to hold at 3.3% for November, and

an in-line reading should be no impediment to an easing.

U.S. 10-year benchmark Treasury yields were 3 basis points

higher.

Traders are also expecting rate cuts in Europe and Canada

later this week and are leaning towards a 50 basis point cut in

Switzerland as authorities may like to tap the brakes on the

franc's relentless rise against the euro.

The euro dipped 0.2% on the dollar to $1.05255,

and was a fraction weaker on the franc at 0.9260 francs. The

Japanese yen, which was the best-performing G10

currency in November as expectations have grown for a December

rate hike in Japan, was weaker at 151.64 per dollar.

Positioning data shows speculators flipped to a long yen

position last week for the first time in more than

a month.

Oil prices slipped on Tuesday as concerns eased about the

potential regional fallout from Syrian President Bashar

al-Assad's overthrow, but the China news gave some support.

Brent crude futures were down 0.26% at $71.95 a

barrel.

Gold rose 0.7% to $2,677 an ounce while bitcoin

fetched $97,400.