GLOBAL MARKETS-Shares start month on a high after bullish PMIs

* Shares, euro little changed after EZ inflation undershoots
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* For Reuters Live Markets blog on European and UK stock
markets,
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(Updates throughout, adds commentary)
By Elizabeth Howcroft
LONDON, Sept 1 (Reuters) - Stocks started September on a
positive note on Tuesday, with global indexes close to all-time
highs as data in China and Europe showed manufacturing demand
rebounding from coronavirus-induced lows.
Factory activity in China expanded at the fastest rate in
nearly a decade in August, a private PMI survey showed on
Tuesday, boosting market sentiment overnight and at the European
market open. Euro zone manufacturing activity also grew last month,
though factory managers remained wary about investing and hiring
more workers. In Germany, Europe's largest economy, output grew at its
fastest pace since February 2018, while in France it contracted.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was close to recent highs, while the
pan-European Stoxx 600 was up 0.2% at 1020 GMT.
France's Cac 40 was up 0.2% .FCHI and Germany's Dax
.GDAXI was up 0.7%. Britain's FTSE 100 lagged, down 1.4%, hurt
by a rising pound .FTSE GBP=D3 .
European stocks had opened even higher but pared gains after
Germany cut its GDP forecast for 2021. Both shares and the euro, which rose to a two-year high of
$1.19975 overnight in New York, were little changed after data
showed annual euro zone inflation fell well below expectations
in August, turning negative for the first time since May 2016.
At 1025 GMT, the single currency traded at $1.19835, up 0.4%
since New York's close as a dollar sell-off continued EUR=EBS .
The data print was a far cry from the European Central
Bank's inflation target of just under 2%. "These numbers are clearly inconsistent with the ECB's
target," said George Buckley, chief European economist at
Nomura, who said the low reading will raise questions about
whether the ECB should, like the Fed, adopt average inflation
targeting.
There were however credibility issues with such an approach,
if the bank was unable to raise inflation to balance out the
periods of lower inflation.
Investors are betting on U.S. rates staying lower for longer
after Federal Reserve Chair Jerome Powell on Thursday said the
central bank was shifting to average inflation targeting.
Versus a basket of currencies the dollar was down 0.4% at
91.826 at 1025 GMT, dropping below 92 for the first time since
May 2018 =USD .
Sterling rose to eight-month highs against the dollar,
strengthening to as much as $1.3465 at 1028 GMT GBP=D3 , and
was up around 0.3% versus the euro EUR=EBS . Core euro zone bond yields were up around 1 to 2 basis
points, with the benchmark German 10-year yield at -0.387%
DE10YT=RR .
Oil prices gained, reversing overnight losses. Brent crude LCOc1 futures climbed 56 cents to $45.84 a
barrel at 1029 GMT. U.S. West Texas Intermediate (WTI) crude
CLc1 futures rose 47 cents to $43.08 a barrel.
Gold prices also rose, to their highest in two weeks XAU= .
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