GLOBAL MARKETS-China PMI lifts shares, commodities, euro soft ahead of ECB

* Wall St record, upbeat China data lift Europe, Asia shares

* Expected ECB stimulus later in week keeps euro pressured

* Rising risk appetite extends gold's poor run

* Wall St set to inch ahead as world shares drift higher

By Marc Jones

LONDON, June 2 (Reuters) - Reassuring Chinese factory data

and another record high for Wall Street lifted world stocks and

commodities on Monday, as markets waited to see how far the

European Central Bank will go with policy easing plans this


The euro fell against the dollar, as subdued

inflation readings in Germany and slower-than-expected

manufacturing growth in the euro zone piled pressure on the ECB

to act aggressively when it meets on Thursday.

Shares and commodities rose globally however as a rebound in

Chinese manufacturing data helped soothe jitters about its

economy following a wobble in the early months of this year.

Germany's DAX stock index closed in on 10,000

points for the first time, while gains elsewhere in Europe and a

2-percent jump for Tokyo's Nikkei left MSCI (NYSE: MSCI - news) 's world

index edging to its own all-time high.

Futures prices pointed to the momentum just about holding

for the start of U.S. trading, where the S&P 500 and Dow

Jones Industrial both begin what will be a busy week.

U.S. jobs data comes on Friday, but the main event will be

the ECB's meeting on Thursday after weeks of frenzied

speculation about rate cuts and other policy measures.

Like many, Societe Generale (Paris: FR0000130809 - news) expects the central bank to cut

rates and start charging banks that deposit cash with it, but

unlike most, it also expects a far more aggressive 300 billion

euro ($400 billion) Asset Backed Securities (ABS) purchase

programme to be announced.

"We are expecting quite a slew of measures from the ECB,"

Societe Generale FX strategist Alvin Tan said.

"In our view all the rate cuts are priced in, even a

negative deposit rate, but an asset purchase programme is

probably not, so that would weaken the euro," he said.

The euro fell 0.2 percent to hit $1.3595 in the

European session, not far from a three-month low of $1.3586

touched on Thursday. It also fell against sterling

to 81.15 pence, with diverging monetary policy outlooks between

the ECB and the Bank of England underpinning the pound.


Though the U.S. Federal Reserve, Bank of England and Bank of

Japan have long been using near-zero interest rates, the ECB is

expected to go a step further and bring in a "negative deposit

rate" by which it would charge banks who hoard spare cash.

Extra pressure for the ECB to act aggressively came from

German annual inflation data, which showed a slowdown to its

weakest rate in nearly four years in May.

European bonds continued to perform strongly and

in Asia, the positive sentiment spilling over from China helped

the Nikkei and saw Australian shares add 0.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan

was little changed. Greater China (HKSE: 0431.HK - news) markets were

closed on Monday for a holiday.

The dollar was broadly stronger. It edged up 0.2 percent to

102.12 yen thanks in part to slightly higher U.S.

Treasury yields and as it rode momentum from Friday's record

close for the S&P 500.

"With market participants unwilling to be brave enough to

take against-consensus euro long positions ahead of the

(ECB)meeting, and the potential for an upside surprise in U.S.

data, we expect euro/dollar to remain under pressure," ING

currency strategist Petr Krpata said.


The robust China PMI reading also lifted base metals by

lifting demand prospects for the world's second biggest economy,

and supported emerging market currencies and stocks.

China's factory activity expanded at the fastest pace in

five months in May, official data showed on Sunday, reinforcing

views that its economy is regaining traction following support

from Beijing.

Three-month copper on the London Metal Exchange

climbed 1.2 percent to $6,925 a tonne. The metal gained 3.1

percent in May, its biggest monthly advance since December.

With risk appetite strong, safe-haven gold slid for a fifth

straight session. Spot gold was at $1,246 an ounce, not

far from the four-month low of $1,241.99 hit on Friday.

Oil also slipped as the stronger dollar weighed.

"It's certainly a good sign to see the PMI starting to pick

up, which suggests that the Chinese fine-tuning of policies is

starting to gain a bit of traction which is a positive for

industrial commodities," National Australia Bank analyst James

Glenn said.

(Additional reporting by Shinichi Saoshiro in Tokyo and Anirban

Nag in London; Editing by Louise Ireland)