GLOBAL MARKETS-China concerns hit stocks, gold rebound continues

Reuters - UK Focus

* MSCI (NYSE: MSCI - news) world share index down for 3rd day after weak Chinadata

* Wall Street expected to hold ground

* European shares steady, safe-haven bonds make ground

* Japan's Nikkei tumbles 2.4 pct, Thai stocks fall to16-month low

* Gold climbs to near three-week high, copper at two-weeklow

By Marc Jones

LONDON, Jan 6 (Reuters) - Concerns over a slowdown inChina's economy triggered a third day of falls for world shareson Monday and extended a spritely rebound in gold to leave it ata near three-week high.

Figures showing that China's services sector slowed sharplylast month added to a stack of disappointing data from theworld's second largest economy over the last week and left WallStreet eyeing another cautious start.

MSCI's world stock index, which tracks 45countries, was at a three-week low following Beijing's heftyovernight drop and a rocky start to 2014 for Tokyo's Nikkei which saw its biggest fall in over two-months.

European moves were far more muted, however, as a raft ofdata showing the divergence between top economies Germany andFrance, but also the gradual recoveries in Italy and Spain,cushioned the impact.

Ahead of the start of U.S. trading, the pan-regionalFTSEurofirst 300 had fought back to neutral territoryas London's FTSE, Paris's CAC 40 and Frankfurt'sDax all recovered from early tumbles.

"You could argue we have had some mixed news on the economicfront, but I think in general the trend in the numbers is animproving one globally," said Robert Parkes, an equitystrategist at HSBC.

"The China is data is relevant but of course so are the eurozone PMIs that we have seen... We don't believe we are going tosee a hard landing in China."

Despite the recovery in stocks there was still plenty ofevidence of the caution the China data had fostered amonginvestors.

Safe-haven European bonds were holding gains,copper - highly-attuned to China's fortunes - remainedfirmly under pressure, while in the currency market the dollar hovered near a four-week high.

CHINA

The culprit for the moves was growth in the China's hugeservices sector which slowed sharply in December to its lowestpoint since August 2011.

The figures also came hot on the heels of a similar officialsurvey on Friday and two other PMIs last week showing factoryactivity also soured.

China's CSI300 share index sagged 2.3 percent,hitting a five-month low and MSCI's broadest index ofAsia-Pacific shares outside Japan slid 0.8percent to a three-week trough.

The Chinese index is now down 3.9 percent since the start ofthe year, adding to last year's 7.6 percent decline.

"The focal point of the Asian markets is more on Chinesegrowth and on Chinese political situation and how it's going topan out this year" said Guy Stear, Asian credit and equitystrategist at Societe Generale (Paris: FR0000130809 - news) , as opposed to worries much ofthe world has about a reduction in U.S. central bank stimulus.

GOLD RUSH

The main beneficiary of the Asian tensions remained gold asit continued to rebound from last year's worst run in over threedecades.

It was sitting at $1,238 an ounce as afternoon dealinggathered momentum in London, it's highest in three weeks and oncourse for a fifth day of back-to-back gains. Oil bounced tooafter four days of falls, with Brent at $107.76 a barrel.

"Weaker equities will have more of an impact on gold pricesthan a stronger dollar," said Helen Lau, an analyst at UOB (SES: E1:U11.SI - news) -KayHian Securities in Hong Kong. "It is all about allocation byfunds."

On the opposite side of the China coin was the South Koreanwon as it hit a near six-week low. Ongoing politicaluncertainty in Thailand also left the baht at a nearfour-year trough and Thai stocks at a 16-month low.

With Japanese equities taking a beating, the yen got somerespite against the dollar, up 0.3 percent at 104.55 yen.And with the ECB's first meeting of the year looming on Thursdaythe euro edged up from a one-month low to $1.36.

Wednesday's December Fed meeting minutes and then Friday'snon-farm payrolls data could determine the dollar's next move.They should give further clues on how quickly the Fed is likelyto wind in its huge stimulus programme in the coming months.

"With the Fed having set the tapering process in motion, itwould likely take a fairly significant miss to derail taperingexpectations and push yields significantly lower from theiryear-end levels," analysts at BNP Paribas (Milan: BNP.MI - news) wrote in a note.

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