* Euro zone business activity growth slows as France lags
* Upbeat China PMI supports Asia stocks, Aussie dollar
* Brent crude edges up on Iraq unrest before pulling back
By Nigel Stephenson
LONDON, June 23 European shares fell on Monday
after euro zone business activity data showed growth slowing,
with France a notable laggard, in contrast with upbeat numbers
from China that lifted Asian shares and the Australian dollar.
Brent crude oil prices topped $115 a barrel on concerns that
unrest in Iraq, where Sunni insurgents seized control of
strongholds along the Syrian border over the weekend, could
The pan-European FTSEurofirst 300 stocks index fell
0.3 percent, although it held close to Friday's 6-1/2-year high.
Wall Street looked set for a flat open. The S&P 500
and Dow Jones closed at record highs on Friday.
"The market doesn't like at all the French PMIs, and the
German data is also disappointing. It eclipses the upbeat
Chinese data from overnight and it's a reminder that the latest
ECB measures are not magic," Saxo Bank trader Andrea Tueni said.
The euro zone's flash composite purchasing managers' index
fell to 52.8 in June, below forecast, from 53.5 in May, data
provider Markit said.
"The overall picture is one of fairly sluggish growth as
opposed to any rip-roaring acceleration," Markit chief economist
Chris Williamson said.
Earlier, the corresponding number for France fell to 48.0
from May's 49.3. slipping further below the 50 level that
separates expansion from contraction. Germany's PMI showed its
private sector expanded for the 14th consecutive month in June.
The euro inched lower after the German data and was last
down 0.2 percent on the day at $1.3580.
European Central Bank President Mario Draghi suggested in a
weekend interview that interest rates would stay low at least
until the end of 2016.
"The PMI surveys say roughly the same thing as Draghi's
comments over the weekend: policy will stay very accommodative
in Europe for a long time to come," said a London bank dealer.
Earlier, the HSBC/Markit Flash China PMI showed factory
sector activity expanded for the first time in six months in
June, offering new signs the economy is stabilising following
moves by Beijing to shore up growth.
"This month's improvement is consistent with data suggesting
that the authorities' mini-stimulus is filtering through to the
real economy," said Qu Hongbin, chief economist for China at
HSBC, referring to a series of measures announced by the
government in recent months to spur activity.
MSCI's broadest index of Asia-Pacific shares outside Japan
climbed 0.5 percent but later gave up the gains.
Tokyo's Nikkei index hit a five-month closing high as
the China data added to the positive mood arising from a dovish
statement after a U.S. Federal Reserve meeting last week.
The Australian dollar, which closely tracks the
economy of Australia's top export market China, rallied.
It gained 0.5 percent to $0.9439, touching the day's of
$0.9444, within reach of 2014's peak of $0.9461 hit in April.
The dollar slipped 0.2 percent to 101.85 yen.
Brent crude oil last stood at $114.89 a barrel, just
short of a nine-month high hit on Friday.
"Oil prices remain a risk. Brent has been trading above
$115/bbl, as the security crisis in Iraq continues to deepen,"
Barclays said in a report.
The China numbers helped nudge longer-term euro zone
government bond yields higher, though ECB chief Draghi's
comments supported short-term debt. Benchmark two-year German
yields edged down to 0.036 percent.
"Positive PMI data from Asia moved core rates a bit higher
this morning ... (but given) the ECB's stance, it (would have
taken)... a big surprise in euro zone PMI to see major market
moves," said Jan von Gerich, chief fixed income analyst at
Gold slip further from a two-month high, though safe-haven
demand related to Iraq kept it above $1,300 an ounce. It was
last at $1,312.
(Additional reporting by Shinichi Saoshiro in Tokyo, Blaise
Robinson in Paris, Jamie McGeever and Patrick Graham in London,
editing by John Stonestreet)