CORRECTED - Asia shares, currencies tumble; oil jumps at start of 2016

(corrects name and title in para 6)

By Hideyuki Sano

TOKYO (Reuters) - Asian shares and currencies fell on Monday on the first day of trading in 2016 after China factory activity contracted and the yuan weakened, while oil prices jumped as much as 3 percent on rising tensions in the Middle East.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7 percent, after shedding nearly 12 percent in 2015 as China's cooling economy took a toll on its trade-reliant Asian neighbours and global commodity prices.

Japan's Nikkei fell 2.6 percent to 2-1/2-month lows, while mainland China shares tumbled more than 4 percent.

U.S. stock futures dipped 0.4 percent.

Adding to worries about China, its central bank fixed the yuan at a 4-1/2-year low, while manufacturing surveys showed any hopes for a recovery in that sector were premature.

"While fiscal support has helped slow the rate of economic deceleration, China needs to balance the need for stimulus with the reality of the unsustainable buildup in debt. This will continue to limit the scope for stimulus, and suggests further economic deceleration in 2016," Russ Koesterich, BlackRock's global chief investment strategist, said in a note to clients.

The offshore yuan fell 0.5 percent to 6.6030 per dollar, edging near a five-year low touched last week. Onshore, trade, the yuan hit its lowest since April 2011.

Other Asian and Antipodean currencies were broadly weaker as a result.

The Australian dollar fell 0.8 percent to $0.7225 while the Korean won shed 0.6 percent to 1,183.8 per dollar. The Indonesian rupiah and the Malaysian ringgit fell 0.7-0.8 percent.

After allowing the yuan to weaken by the most on record last year (4.7 percent), China's stance on further depreciation of the currency will be a major question mark hanging over markets in 2016.

"There is speculation that China wants to guide the yuan much lower," said a trader at a Japanese bank. "But we often see erratic trades at the start of year. We have to see if this continues," said a trader at a Japanese bank.

Oil prices jumped as Saudi Arabia's execution of a prominent Shi'ite Muslim cleric at the weekend spurred regional anger and geopolitical tensions in the Middle East. Riyadh cut ties with Iran after protesters stormed the Saudi embassy in Tehran.

Global oil benchmark Brent futures gained as much as 3.3 percent to $38.50 per barrel, the highest in about three weeks.

The cautious mood toward riskier assets helped the yen, which rose to 2 1/2-month high of 119.685 to the dollar.

The euro stood little changed from the end of last year at $1.0851.

Investors looked to how much further the U.S. Federal Reserve can raise rates this year after its first rate hike in almost a decade last month.

An immediate focus will be on business activity surveys on Monday, with concerns about the U.S. and Chinese economies and their policy implications expected to fixate investors again this year.

The ISM survey on U.S. manufacturing is expected to show the sector is still in contraction after having hit a 6-1/2-year low in November.

"It was quite unusual for the Fed to raise rates when the ISM is below 50, (which indicates contraction). And we are likely to see another month of contraction. We have to see how long this will continue," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

(Editing by Kim Coghill)