* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* European stocks climb after upbeat data, Wall Street seen up
* Euro holds near 6-month high, dollar flat as Trump budget due
* Oil dips back below $54 on Trump budget proposals
* Sterling dips after Manchester suicide attack kills 22
By Marc Jones
LONDON, May 23 (Reuters) - Shares climbed and the euro hit a six-month month high before running out of steam on Tuesday, as the latest economic data made for encouraging reading, especially in Germany.
Investors continued to grapple with U.S. uncertainty as President Donald Trump’s first full budget plan loomed, and a suicide bombing in Britain subdued the pound.
But the euro zone PMI surveys showing the bloc’s firms on their strongest run since 2011 as well as best manufacturing sector jobs growth in the survey’s 20-year-history bolstered signs the bloc is finally outperforming.
London’s FTSE, Frankfurt’s DAX and the CAC in Paris were up 0.3 percent, 0.5 and 0.7 percent as what was expected to be a modestly higher start for U.S. markets neared.
The euro hit $1.12680 to beat the previous day’s high by a whisker, only to fade back to $1.12225 as traders locked in some of this month’s 3.5 percent surge.
“We’ve got a good pace of growth here. The fact we have maintained this high level in May is great news for second quarter GDP,” said Chris Williamson, chief business economist at IHS Markit which compiles the monthly PMI data.
It was not all smooth going though. Signs that euro zone governments and the International Monetary Fund remain some way apart on Greece’s debt problems nagged at bond markets and hit Greek shares.
Greece’s short-dated government bond yields rose sharply as the IMF’s chief negotiator stuck to its stance that there needs to be more realism on what Athens can deliver after almost a decade in crisis.
The prospect of the ECB scaling down its multi trillion euro stimulus programme if data remains as strong as it is, nudged up yields on German Bunds and other higher-rated government debt.
“The risk-off environment is already erased and we are back to the levels we saw yesterday on the back of the very bright economic outlook,” said DZ Bank analyst Rene Abrecht.
Britain’s sterling was back below $1.30 and at a near two-month low of 86.6 pence per euro as more signs of drop in the UK economy followed a suicide attack in Manchester that killed at least 22 people and wounded 59.
The bombing came as Britain gears up for a snap election on June 8 that Prime Minister Theresa May is expected to win easily, although polls show the contest tightening. Friction with the EU ahead of Brexit negotiations has also added to sterling’s woes.
Asian trading had seen a modest pull back in risk appetite with MSCI’s broadest index of Asia-Pacific shares dropping back from near two-year highs.
Tokyo’s Nikkei closed down 0.3 percent as Japanese manufacturing activity expanded at the slowest pace in six months, while trading in China was choppy on concerns over a regulatory crackdown on lending practices.
Its president Xi Jinping said later that authorities will also regulate overseas operations of Chinese companies more closely.
The dollar remained in the doldrums too. It was stuck at a 6-1/2-month low against a basket of other major currencies as low 10-year U.S. Treasury yields also underscored the dwindling hopes for significant near-term U.S. fiscal stimulus. The White House will present Trump’s first full budget plan to lawmakers on Tuesday. Its proposals include a $3.6 trillion cut in government spending over 10 years, balancing the budget by the end of the decade.
Congress holds the federal purse strings and often ignores presidential budgets, which are proposals and may not take effect in its current form.
But the plan, which is to advocate selling half of strategic U.S. oil reserves, weighed on crude futures, offsetting optimism over expectations that other major oil producers would agree to extend supply curbs this week.
Global benchmark Brent retreated 0.8 percent to$53.44 a barrel and U.S. crude futures dipped to $50.71, having hit their highest level in more than a month overnight.
The weaker dollar lifted gold slightly, however. Spot gold climbed 0.1 percent to $1,261.56 an ounce in its third straight session of gains.
“This broad dollar weakness remains,” Saxo Bank’s head of FX strategy John Hardy said.
“But I think it is getting a bit stretched on the euro story and I think the market may feel that as well.”
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Jonathan Cable and Abhinav Ramnarayan in London; Editing by Raissa Kasolowsky and Ed Osmond)