GLOBAL MARKETS-Shares, euro dragged lower by grim economic data
* European shares edge down from two-month highs
* Euro struggles on weak data, ECB meeting eyed
* Trade subdued with U.S. closed for Independence Day
LONDON, July 4 (Reuters) - World shares, the euro and oil prices fell on Wednesday as evidence grew of the headwinds facing the global economy, though hopes of policy easing by major central banks limited the falls.
Strong demand for safe-haven German debt at a bond auction also signalled that investors remain worried about the implementation of recently agreed measures to help ease the euro zone's debt crisis, with Spanish and Italian bond yields higher.
However, activity was very subdued with U.S. markets closed for the Independence Day holiday and before policy decisions from the European Central Bank and Bank of England on Thursday.
In the quiet market Germany still found it easy to sell 3.3 billion euros ($4.2 billion) of 5-year government bonds, receiving bids for 2.7 times the amount on offer at an average yield of just 0.52 percent.
"What we are seeing is that ... this demand for safety remains intact," said Michael Leister, rate strategist at DZ Bank.
After the auction 10-year Spanish bond yields rose 14 basis points to 6.4 percent, and the Italian equivalent rose 12.5 basis points to 5.77 percent.
The euro steadied against the dollar to trade around $1.2525 , under pressure from widespread expectations that the ECB is about to cut interest rates.
The single currency fell to an 11-1/2 year low against the higher-yielding Swedish crown when Sweden's central bank kept its main interest rates unchanged.
European share markets ended three days of gains, with the FTSEurofirst 300 index of top European shares finishing down 0.2 percent at 1,044.29 points, retreating from a two-month high set on Tuesday.
MSCI's world equity index also snapped a three-day rally, dipping 0.1 percent to 316.03 points.
Equity markets began their latest rally on Friday, having fallen sharply for much of June, after European Union leaders agreed on new measures to support the region's banks and address funding problems facing Spain.
Investors have also been encouraged back into riskier asset markets by the belief that the ECB will cut rates on Thursday and that it may also inject fresh funds to help boost the region's struggling economy.
A Reuters poll of economists showed a majority of economists expect the ECB to cut its main rate by 25 basis points to 0.75 percent on Thursday, while money market traders are evenly split on whether the central bank will cut the deposit rate, a separate survey showed.
"Investors will also want to see if the ECB President (Mario Draghi) will highlight downside risks to growth and inflation, which will set the ground for more easing," said Paul Robson, currency strategist at RBS.
The Bank of England is expected to launch a third round of monetary stimulus at its meeting.
Data releases from across the globe continue to add weight to the view that the world economy is slowing down.
An survey of private Chinese service sector firms showed their activity growing at the slowest rate in 10 months in June as new orders growth cooled, although the services Purchasing Managers Index has shown 43 months of expansion.
Another survey revealed that Germany's services sector unexpectedly stagnated in June, ending an eight-month period of expansion as new orders dropped.
A composite Purchasing Managers' Index (PMI) for the whole euro area, which surveyed thousands of companies, was revised up in June, but has been below the 50 mark that separates growth from contraction for nine of the last 10 months.
"The PMIs are bottoming out at a level consistent with further contraction of (economic) activity in the second quarter," said James Nixon, chief European economist at Societe Generale, of the euro zone PMIs.
The prospect of further central bank monetary easing has supported the prices of gold and other commodities this week, but the increasingly grim news about the health of the world economy has sparked a retreat.
"We believe that the euro zone crisis, the U.S. fiscal cliff, and the possibility of a hard landing in China will give the markets plenty to worry about and will keep risk appetite low and constrained," Societe Generale said.
The bank has lowered its price outlook for Brent crude by $5 a barrel to $100.
Brent crude, which had also been gaining on rising tension over Iran's nuclear programme, was $1.10 lower at $99.58 per barrel after jumping more than 3 percent on Tuesday.
Brent crude was trading as low as $88.49 on June 22.
Spot gold was little changed, holding near a two-week high of $1,624.70 an ounce at $1,616.05, having risen more than 4 percent since last Friday.
The gold market is likely to remain steady before the release of U.S. monthly employment data on Friday, which may encourage talk the Federal Reserve will join with its European counterparts in taking additional policy easing measures.
The U.S. monthly jobs report is expected to show 90,000 workers were added to non-farm payrolls in June and the unemployment rate held at 8.2 percent.