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GLOBAL MARKETS-Share rally peters out, euro lifted by PMI boost

* Euro zone PMI bolsters recovery prospects, lifts euro

* China PMI shows growth still slowing

* Aussie dollar plunges as inflation falls

* Subdued U.S. opening expected, earnings deluge eyed

By Marc Jones

LONDON, April 23 (Reuters) - European shares edged down on

Wednesday after three days of gains as signs of a slowing

Chinese economy and rising worries about Ukraine offset

reassuring European economic data.

After racing higher on Tuesday on a wave of takeover

activity, European stocks fell 0.3 percent as investors locked

in some of the gains and turned their attention to the region's

broader economic outlook.

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U.S. stock futures also pointed to a subdued start for Wall

Street on a heavy day of company earnings as well as U.S.

PMI readings.

The PMI (Other OTC: PMIR - news) readings for Europe showed that France's economy was

still lagging, but Germany continued to power the euro zone's

recovery. Europe's private sector has started

the second quarter on its strongest footing in nearly three

years, according to the PMIs, although new orders were again

mainly buoyed by price cuts.

"It's pretty encouraging considering what we have seen for

years. We are looking at 0.5 percent quarter-on-quarter GDP

growth if we continue to see this level," said Chris Williamson,

chief economist at Markit, which compiles the PMIs.

"Clearly we should see the pace of growth continue into May

and possibly June as well. Companies are beginning to feel this

is something sustainable."

The data lifted the euro and the region's government

bonds, but after a 3 percent rise in the last two days

some stock market investors decided to in their gains.

London's FTSE dipped 0.1 percent, but a 0.4 percent

drop by Paris's CAC 40 and 0.3 percent declines in

Frankfurt and Milan were the biggest drag on

the pan-European FTSEurofirst 300.

Mixed earnings were also a factor. Swedish mobile telecom

equipment maker Ericsson (Xetra: ERCA.DE - news) fell almost 5 percent after

it missed targets. So far this reporting season, 53 percent of

companies have beaten or met expectations, compared with 58

percent in Q4 2013.

DELICATE CHINA

U.S. analysts were already sifting through some estimate-

topping numbers released before the market opened, from the

chemicals giant Dow Chemical (Berlin: DCH1.BE - news) and airline Delta.

In Asia, the main economic data of the day had been less

encouraging.

China's stock markets fell again and the yuan

tumbled to 16-month low after a survey showed

manufacturing activity in the world's second-biggest economy was

still slowing in April, and the country's central bank moved

again to keep its currency ticking lower.

The HSBC/Markit flash Purchasing Managers Index (PMI) for

April rose to 48.3 from March's final reading of 48.0, but was

still below the 50 line separating expansion from contraction.

The Australian dollar tumbled to a two-week low

after data showed surprisingly low inflation in the first

quarter. It slid more than one U.S. cent to $0.9277 and

interbank futures rallied as the market reassessed the

chances the Reserve Bank of Australia will raise interest rates

before year-end.

"The fall in the Aussie was quite large considering that

interest rate markets weren't pricing a hike until mid-2015

anyway," said Sean Callow, currency strategist at Westpac. "The

slide gives the impression that Aussie bears have been waiting

for a reason to bash it."

Back in Europe, the euro bounced to $1.3845 before

fading slightly, as the upbeat PMI data and more encouraging

news on Greece and Spain's finances countered recent talk of

interest rate cuts from ECB policymakers.

The pound climbed near a four-year high as the Bank

of England flagged how Britain's economy was gaining speed.

UKRAINE STRAINS

The sobering economic news on China added to a host of

country-specific issues to drag down most emerging Asian

currencies and put emerging-market stocks in the red for a third

day.

The Indonesian rupiah fell to its weakest in more

than seven weeks on rising demand for dollars at month's end.

Turkey's lira hovered near three-week lows as traders

awaited a rate decision from the country's dovish central bank.

In commodity markets, Brent crude held above $109 a

barrel, just off a six-week high of $110.36 reached last week,

propped up by the stand-off in Ukraine.

The U.S. threatened Russia with more sanctions on Tuesday

and Ukraine's government said on Wednesday it was restarting an

"anti-terrorist operation" to eliminate armed pro-Russian

separatist groups in the east of the country.

That kept both Ukrainian and Russian assets under pressure.

Stocks in Moscow fell 0.6 percent to a one-week low and Russia's

central bank shifted its target exchange rate as it continued

interventions to steady the rouble.

It also helped steady gold after it had touched its

lowest in more than two months on Tuesday, weighed down by this

week's gains in Wall Street stocks and as outflows from physical

gold funds pointed to weak investment appetite.

(Additional reporting by Jonathan Cable; Editing by Larry King)