GLOBAL MARKETS-U.S. gridlock over stimulus keeps stocks muted, dollar edges higher

* European shares open slightly higher
* Asia ex-Japan dips, Nikkei aided by yen pullback
* Caixin China PMI beats forecasts at 52.8
* Dollar adds to Friday bounce, after a punishing July
* Gold reaches new peak, eyeing $2,000 level

By Thyagaraju Adinarayan
LONDON, Aug 3 (Reuters) - World stocks began August
cautiously as U.S. lawmakers struggled to agree a new stimulus
plan following a global surge of COVID-19 cases, though a
squeeze on crowded short positions left the dollar clinging to a
tentative bounce.
European stocks opened slightly higher on Monday following
mixed moves in Asia. The pan-European STOXX 600 .STOXX index
rose 0.6%, helped by a rise in technology stocks, but gains were
capped by poor earnings updates from big banks.
Index heavyweight HSBC HSBA.L warned its bad debt charges
could go beyond a previous estimate to $13 billion, and France's
Societe Generale SOGN.PA reported a 1.26 billion euro ($1.48
billion) second-quarter loss.
E-Mini futures for the S&P 500 ESc1 were little changed,
with investors nervous about the lack of a new stimulus package
in the United States and White House Chief of Staff Mark Meadows
not optimistic about a deal. On Friday, Fitch Ratings cut the outlook on the United
States' triple-A rating to negative from stable, citing eroding
credit strength and a ballooning deficit.
It said the direction of U.S. fiscal policy depends in part
on the November presidential election and the resulting makeup
of Congress, cautioning that policy gridlock could continue.
"Three months to go until the U.S. Presidential election!
Surely Congress will want to get something over the line
regarding new stimulus in the US driven more by politics than
necessarily economics," said Chris Bailey, Raymond James
European strategist.
But the U.S. technology sector has scaled fresh record
highs, and last week Apple AAPL.O became the world's most
valuable company.
In Asia on Monday, China's factory activity data showed the
fastest pace of expansion in nearly a decade. That helped China's blue chips .CSI300 rally 1.6%,
offsetting worries about U.S.-China relations. Japan's Nikkei
.N225 added 2.2%, courtesy of a pullback in the yen. South
Korea shares .KS11 were flat.
In currency markets, the U.S. dollar ticked 0.1% higher as
bears took profits on crowded short positions, but further gains
were capped by the slowing U.S. economic recovery from COVID-19
and real rates breaking below -1% for the first time.
"Amid improvements in business sentiment, signals are
emerging that the initial boost from pent-up demand is fading
and consumer confidence is slipping lower," economists at
Barclays wrote in a note.
"Together with concerns about labour market and virus
developments, this clouds the outlook and could be exacerbated
if U.S. fiscal support is not renewed in time."
The real rate hit a record low amid a marked flattening of
the yield curve as investors wager on more accommodation from
the Federal Reserve.
Benchmark 10-year Treasury yields US10YT=TWEB were higher
at 0.54% after touching the lowest level since March last week.
German government bond yields rose slightly to -0.527%.
The dollar was last at $1.1755 per euro EUR= , after the
single currency gained 4.8% in July to stretch as far as
$1.1908. Against a basket of currencies, the dollar was 93.423
after touching its lowest since May 2018 on Friday.
The dollar steadied on the yen at 105.95 JPY= after
hitting a 4-1/2-month low last week at 104.17.
Other major currency pairs were largely unchanged.
The decline in the dollar combined with super-low real bond
yields has been a boon for gold, which had its biggest monthly
gain since February 2016.
It hit $1,984 an ounce XAU= early on Monday and seemed on
track to take out $2,000 soon. GOL/
Oil prices eased on concerns about oversupply as OPEC and
its allies, together known as OPEC+, are due to pull back from
production cuts in August while an increase in COVID-19 cases
raised fears of slower pick-up in fuel demand. O/R
Brent crude LCOc1 futures dipped 46 cents to $43.06 a
barrel, while U.S. crude CLc1 eased 51 cents to $39.76.

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