* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* European stocks climb after upbeat data, Wall Street seen
* Euro holds near 6-month high, dollar flat as Trump budget
* Oil dips back below $54 on Trump budget proposals
* Sterling dips after Manchester suicide attack kills 22
By Marc Jones
LONDON, May 23 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
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
"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
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
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
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)