GLOBAL MARKETS-Emerging markets selloff intensifies after Fed, data lifts Europe shares
* Fed minutes lift Treasury yields, strengthening dollar
* Emerging currencies and shares hit by foreign flight
* Upbeat China and German data spur share gains in Europe
* Industrial commodities bounce from lows
LONDON, Aug 22 (Reuters) - The rout in emerging markets gathered pace on Thursday after a sharp spike in U.S. debt yields lifted borrowing costs globally, and upbeat business reports from China and Europe encouraged a shift into more advanced economies.
Purchasing managers surveys from the euro zone and for China's vast manufacturing sector revealed a world economy gathering momentum which also supported industrial commodities and kept Brent oil at $110 a barrel.
But the main driver of markets were the minutes from the last U.S. Federal Reserve policy meeting, which left unchanged expectations that the central bank would being to taper its asset-buying programme as early as next month.
The 10-year Treasury note yield jumped to a two-year high of 2.936 percent, making the dollar more attractive. It rose against an index of major currencies by 0.5 percent and gained 1.0 percent on the yen.
"It looks as if the minutes have done little to push back on market expectations for a Fed tapering," said Ian Stannard, head of European foreign exchange strategy at Morgan Stanley.
With capital on the move and business surveys showing a further pickup in activity in the euro zone, European shares snapped a three-day losing streak to rise 0.9 percent, their second- biggest percentage gain of the month.
U.S. stock index futures also pointed to gains ahead on Wall Street, while MSCI's broadest index of emerging market stocks was on course for a seventh day of losses, bringing its falls this week to over 4 percent.
Emerging currencies, especially from nations relying heavily on cheap dollars to fund large current account deficits, were hit hard. Those of India and Turkey set fresh record lows, while in Indonesia, Malaysia and Thailand currencies sank to multi-year lows.
Share markets across Asia outside Japan dropped 1.1 percent to reach a six-week low. MSCI's global equity index, which tracks shares in 45 countries worldwide, was virtually flat but near six-week lows as the gains in Europe helped the selling elsewhere.
"The outflows (from emerging markets) that are being seen now are really getting very noticeable," said Andrew Milligan, head of global strategy at Standard Life Investments.
Milligan said investors were reacting to both higher U.S. bond yields and a deceleration in Chinese growth, which have combined to force countries like Turkey, Indonesia and Brazil to raise rates while their economies were struggling.
The darkening picture for some emerging markets was in sharp contrast to that painted by surveys of business activity across the euro zone and China in August, released on Thursday, which pointed to renewed growth in the world economy.
Markit's Flash Composite Purchasing Managers' Index (PMI) for the 17-nation euro area bounced to 51.7, from last month's 50.5. It marked its best level since June 2011, led by strength in Germany and pointing to a 0.2-0.3 percent growth rate for the currency bloc in the current quarter.
"If the euro zone is picking up then that bodes well for the global economy," said Chris Williamson, Markit's chief economist.
A sister survey from China rose to a four-month high of 50.1 from July's 47.7, just passing the watershed 50 line that signals an expansion in business activity rather than a contraction.
Figures later in the day are similarly expected to confirm a continued strengthening of U.S. factory output, adding weight to expectations the Fed would start cutting back its immense bond purchase programme next month.
The euro hit $1.3360 after the euro zone PMI data was released, while a selloff in safe-haven German government bonds sent yields to their highest since March 2012. Germany's benchmark DAX share index traded up 0.9 percent.
However, the data was not enough to lift lower-rated euro zone government debt, which fell along with riskier assets in emerging markets.
The China data though gave industrial commodities a boost, with copper jumping 2.0 percent to $7,384 a tonne. Gold, bothered more by the risk of Fed tapering and rising bond yields, backtracked down to $1,367 an ounce.
Brent crude edged up to around $110 a barrel on hopes for better demand as the global economy recovers, though signs that OPEC producer Libya may resume exports dragged on prices. U.S. crude oil futures were up 47 cents to $104.32 a barrel.