European stocks torn between stronger data and latest Fed comments

* FTSEurofirst 300 off session low at 1,262.34

* Euro zone, German PMIs show economy healing

* Dax (Xetra: ^GDAXI - news) could hit 9,000 soon, said strategist

* Nat Grid leads utilities lag after downgrade

By David Brett

LONDON, Sept 23 (Reuters) - European shares traded flat at midday on Monday after stronger euro zone data and Angela Merkel's landslide personal victory in Germany's election failed to offset dampening comments from a U.S. Fed policymaker.

St Louis Federal Reserve President James Bullard said the U.S. central bank could begin to rein in its bond-buying in October if data allowed, dampening the bullish mood on stock markets over the Fed's decision last week to delay withdrawing its monetary stimulus.

Having hit a session low of 1,258.10, the FTSEurofirst was flat at 1,262.34 by 1009 GMT, along with the broader STOXX 600 at 314.17. Both pared losses after euro zone PMI data added to signs that the economy is healing.

"Attractive valuation, improved euro zone macro data and positive earnings revision leave plenty of upside room for the value side in Europe," Nicolas Simar, a fund manager at ING Investment Management, said.

Fund managers continue to turn their focus to equities, albeit from low levels, with Worldwide equity funds tracked by EPFR Global enjoying record net inflows of $25.9 billion in the week ended Sept. 18, the flow data provider said.

Germany's DAX, at 8,675.43, held near its all-time closing high of 8,694.18 and could push even higher in the longer term after the German election.

"With Merkel re-elected the German economy may finally be able to push higher and (the Dax could) reach the dizzy heights of 9,000,"Steve Ruffley, chief market strategist at InterTrader, said.

Equities continue to benefit from central bank policies which diminish returns offered by other asset classes such as bonds and benefit equities. Most European indexes hit multi-year highs after the Fed surprised investors by sticking fully with its current stimulus programme last Wednesday.

But with more Fed members expected to speak on Monday, traders said performance could be choppy.

"We appear to be back to interpreting kites flown by FOMC (Federal Open Market Committee) members and to dependency on monthly data that is notoriously prone to drastic revision," Alastair Winter, chief economist at Daniel Stewart & Co, said.

"It is far from clear what data will be good enough to slow the printing presses."

Leading the fallers on Monday were utilities, led lower by the UK-listed National Grid (LSE: NG.L - news) after a downgrade by UBS (Berlin: UBRA.BE - news) to "neutral" from "buy" on valuation grounds.

Commodity-related shares also faltered, having been among the strongest gainers in the last 3 months, despite stronger-than-expected manufacturing data from China.

Analysts at Citigroup (NYSE: C - news) cast doubt over the outlook for the sector, saying: "The improvement in China's industrial indicators is likely to be short-lived given tight credit and as industrial numbers have been flattered by strong electricity (cooling demand in response to record heat) and steel production (overproduction being pushed onto international markets)."

Miners are also acutely exposed to any talk of money being withdrawn from the economy by central banks.