* European shares extend rally on EU deal
* Euro falls 0.5 pct to around 1.26 vs dollar
* Weak European and Asian data weighs on commodities
* Central bank rate decisions awaited
By Richard Hubbard
LONDON, July 2 (Reuters) - The euro dipped on Monday as the euphoria over last week's deal to tackle Europe's escalating debt crisis ebbed, and weak economic data fuelled concerns over the global growth outlook.
But world shares and most European stock markets gained on relief that some progress had been made by Europe's leaders and hopes the region's central bank would weigh in with a rate cut. U.S. stocks were also poised to open higher.
Oil and other commodities were mostly weaker, giving up some of Friday's big gains made in the wake of the European summit deal to help struggling banks and bond markets, on rising doubts over its viability and as global factory activity slowed.
"People got a bit more than they expected from the EU summit, and we are working our way through that at the moment. But there are so many question marks," said David Morrison, market strategist at GFT Global.
Finland and the Netherlands added to fears over the fragile nature of the agreement by stating they would block a key element of the deal that would have allowed the euro zone's new permanent bailout fund to buy bonds in the market.
The euro fell 0.25 percent to $1.2640, down from a one-week high of $1.2693 hit on Friday.
On its first trading day of the new quarter the pan-European FTSEurofirst 300 index was up 0.7 percent at 1,028.51 points, having earlier touched a two-month high at 1,033.83 points. The gains come on top of Friday's 2.6 percent rise, which was its biggest one-day jump in seven months.
"Expectations were low going into the summit, and the summit delivered more than the pessimists had expected," said Kevin Lilley, European equities fund manager at Old Mutual AM.
Friday's leaders' summit agreed to inject funds from a new permanent bailout fund, the European Stability Mechanism (ESM), directly into struggling banks from next year after the creation of a single region-wide banking supervisor.
It was also decided the new fund could intervene in bond markets to support troubled member states, though the size of the fund was not increased and the conditions under which it would buy sovereign debt are not yet clear.
Spanish and Italian bond yields, seen as most likely to gain from the deal, fell again on Monday, though they remain at elevated levels.
Ten-year Spanish yields were down 4 basis points (bps) at 6.3 percent, while equivalent Italian debt fell 8 basis points to 5.74 percent.
Spanish and Italian yields - or funding costs - remained high versus historical levels, and a Spanish bond auction on Thursday will be the first test of market sentiment since the European Union summit last week, with the country expected to sell up to 2.5 billion euros of paper.
Yields on the 10-year German government bond were steady at 1.58 percent after prices had initially risen on concerns over the sketchy details of the deal and fears for the limited resources of the current bailout fund and the new ESM.
"In theory if these funds were sufficiently capitalised there would be cause for celebration. Unfortunately, they are not sufficiently capitalised, and therefore there is no cause for celebration," said Jeff Sica, president of SICA Wealth Management, which manages more than $1 billion in client assets.
Fresh data showing how the region's crisis is worsening trade flows around the world also weighed on investors.
Purchasing managers' surveys from the major Asian exporting nations of China, Japan, South Korea and Taiwan all showed a slowdown in factory activity for June as demand for export goods from Europe and the United States was weaker than expected.
A similar survey of euro zone factory activity confirmed the region remains mired in recession but also showed corporations were preparing for worse to come, with a separate jobs report showing unemployment rising fast.
The Euro Zone Manufacturing Purchasing Managers' Index (PMI) was unchanged at 45.1 in June, above the preliminary reading of 44.8 but still the lowest reading since June 2009.
The index has been stuck for almost a year below the 50 mark that divides growth and contraction, as a downturn that started in southern Europe has spread across the whole 17-nation currency bloc.
"Companies are clearly preparing for worse to come, cutting back on both staff numbers and stocks of raw materials at the fastest rates for two-and-a-half years," said Chris Williamson, chief economist at data provider Markit.
The gloomy data added to hopes that the European Central Bank would cut its main interest rate by 25 basis points to 0.75 percent on Thursday, with expectations rising that the deposit rate it pays banks to park cash overnight may also be cut.
The weak factory data and renewed worries over the euro zone crisis also pressured oil, sending Brent crude down $2.50 a barrel to a low of $95.30 a barrel. U.S. crude shed $1.80 a barrel to a low of $83.16.
Gold prices edged down about 0.3 percent to $1,592.50 an ounce after surging 3 percent on Friday, its biggest one-day rise since June 1. U.S. gold futures for August delivery were down $11 an ounce at $1,593.20.
Pressured by strength in the dollar, the metal has moved more closely in line this year with higher risk assets such as stocks than the 'safe havens' it tracked last year, including Treasuries, German Bunds, and the U.S. currency.