* Shares, euro little changed after EZ inflation undershoots
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/
(Updates throughout, adds commentary)
By Elizabeth Howcroft
LONDON, Sept 1 (Reuters) - Stocks started September on a positive note on Tuesday, with global indexes close to all-time highs as data in China and Europe showed manufacturing demand rebounding from coronavirus-induced lows.
Factory activity in China expanded at the fastest rate in nearly a decade in August, a private PMI survey showed on Tuesday, boosting market sentiment overnight and at the European market open. zone manufacturing activity also grew last month, though factory managers remained wary about investing and hiring more workers. Germany, Europe's largest economy, output grew at its fastest pace since February 2018, while in France it contracted. MSCI world equity index .MIWD00000PUS , which tracks shares in 49 countries, was close to recent highs, while the pan-European Stoxx 600 was up 0.2% at 1020 GMT.
France's Cac 40 was up 0.2% .FCHI and Germany's Dax .GDAXI was up 0.7%. Britain's FTSE 100 lagged, down 1.4%, hurt by a rising pound .FTSE GBP=D3 .
European stocks had opened even higher but pared gains after Germany cut its GDP forecast for 2021. shares and the euro, which rose to a two-year high of $1.19975 overnight in New York, were little changed after data showed annual euro zone inflation fell well below expectations in August, turning negative for the first time since May 2016.
At 1025 GMT, the single currency traded at $1.19835, up 0.4% since New York's close as a dollar sell-off continued EUR=EBS .
The data print was a far cry from the European Central Bank's inflation target of just under 2%. numbers are clearly inconsistent with the ECB's target," said George Buckley, chief European economist at Nomura, who said the low reading will raise questions about whether the ECB should, like the Fed, adopt average inflation targeting.
There were however credibility issues with such an approach, if the bank was unable to raise inflation to balance out the periods of lower inflation.
Investors are betting on U.S. rates staying lower for longer after Federal Reserve Chair Jerome Powell on Thursday said the central bank was shifting to average inflation targeting. a basket of currencies the dollar was down 0.4% at 91.826 at 1025 GMT, dropping below 92 for the first time since May 2018 =USD .
Sterling rose to eight-month highs against the dollar, strengthening to as much as $1.3465 at 1028 GMT GBP=D3 , and was up around 0.3% versus the euro EUR=EBS . euro zone bond yields were up around 1 to 2 basis points, with the benchmark German 10-year yield at -0.387% DE10YT=RR .
Oil prices gained, reversing overnight losses. crude LCOc1 futures climbed 56 cents to $45.84 a barrel at 1029 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 47 cents to $43.08 a barrel.
Gold prices also rose, to their highest in two weeks XAU= . Emerging markets
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