* Better-than-expected European PMIs boost euro, hurt dollar
* Gauge shows China factory activity skids to 11-month low
* Cautious Fed view on rate hike keeps dollar off recent highs
By Jemima Kelly
LONDON, March 24 (Reuters) - The euro rose and European shares steadied on Tuesday, responding to signs the euro zone economy is gaining momentum, while a slowdown in factory activity in China kept oil and commodities-linked assets under pressure.
U.S. stock index futures edged higher ahead of a data deluge
including measures on inflation, home prices and sales, and
factory activity, starting at 1230 GMT.
In an indication that the European Central Bank's 1 trillion
euro bond-buying programme may already be having a positive
impact, a composite purchasing managers' survey for the 19
members of the euro zone jumped to a near four-year high of 54.1
in March, well above forecasts.
The euro gained 0.4 percent in European trading to hit a
six-day high of $1.1003
"Any positive surprises from the euro area are further adding to this euro/dollar rally, however we think this is temporary," said Nikolaos Sgouropoulos, FX strategist at Barclays in London. "We still believe in the dollar strength trend going into the second half of the year."
The dollar plunged last week after the U.S. Federal Reserve cut its inflation outlook and its growth forecast and the market pushed out its consensus of when the Fed will raise rates to at least September.
On Tuesday the dollar was down 0.3 percent against a basket
of major currencies
San Francisco Federal Reserve Bank President John Williams
said on Tuesday the strong dollar would drag on U.S. growth this
year, though the economy was strong enough to handle it.
At 1150 GMT, the FTSEurofirst 300
CHINA GROWTH WORRIES
Brent crude fell under $56 a barrel
The China flash HSBC/Markit Purchasing Managers' Index (PMI)
dipped to 49.2 in March, below the 50-point level that separates
expansion from contraction. Economists polled by Reuters had
forecast a reading of 50.6, slightly weaker than February's
final PMI of 50.7.
The private survey is likely to add to calls for more monetary easing from Beijing.
"China is the big risk," said Ian Stannard, head of European FX strategy at Morgan Stanley in London. "It can put the whole of Asia ex-Japan under pressure and there is some feed-through to G10 through the commodity currencies."
The Shanghai Composite share index
Japan's Nikkei stock average
In Japan, a similar manufacturing survey added to concerns
that its slowly recovering economy may also be losing momentum,
with activity expanding at a much slower clip as domestic orders
Spain's bond yields lagged a broad rally in euro zone bonds
as investors queued up for a rare sale of inflation-linked debt.
Yields on the country's 10-year bonds were up 1 basis point at
(Additional reporting by Ahmed Aboulenein, Patrick Graham and John Geddie in London, Blaise Robinson in Paris and Lisa Twaronite in Tokyo; Editing by Mark Trevelyan) ((firstname.lastname@example.org)(+44)(0)(20 7542 7508)(Reuters Messaging: email@example.com))
Keywords: MARKETS GLOBAL/