* Euro, shares dip after mixed European data
* Sterling at trade-weighted five-year high
* HSBC final PMI suggests China manufacturing stable
* Thai stocks, baht skid as protests continue
LONDON, Dec 2 (Reuters) - World shares dipped and the dollar strengthened on Monday, as investors waited for key U.S. data this week after a decent reading on China manufacturing and some mixed euro zone PMIs. European shares had a choppy start as traders digested the data. Sterling hit a five-year high as optimism about Britain's recovery heightened expectations interest rates would soon rise from their record low. It was a nervy start to the week on a number of fronts. Investors had plenty of possible excuses to put a lid on world stock markets and halt 8 straight weeks of gains on Wall Street. Geopolitics got most of the headlines. Upheavals in Ukraine and Thailand escalated over the weekend. Tension grew between China and Japan over disputed islands in the South China Sea. A decent reading on China manufacturing helped anchor Asian stocks, but Europe suffered turbulence early on. Stock markets lurched into the red and the euro backslid after gaining in Asia. Buoyant demand for manufactured goods drove euro zone factory activity to accelerate at its fastest pace in over two years last month. But growth was still weak, and Markit, which compiles the Purchasing Managers' Indexes, said evidence of a renewed downturn in France and Spain - as well as firms cutting staff - was disappointing. Britain's FTSE 100, Germany's DAX and France's CAC 40 all opened higher but were soon nursing losses. Milan and Madrid suffered the most, tumbling 1.3 and 0.9 percent. Debt markets told a similar story. Bonds from core euro zone countries such as Germany and the Netherlands lost ground. So did those from Italy and Spain, both countries on the periphery.
"You have seen the PMIs and some are better than others, but what is does seem to point to is a diverging European economy, and that is a bit of a worry," said Michael Hewson, senior markets analyst at CMC Markets in London. "There is a lot of U.S. data this week and we are also in the last month of the year. Investors are going to be reluctant to take on new risk."
CHINA REASSURES, THAILAND FIGHTS China's factory activity kept up steady growth in November, boosted by new orders, although the pace of expansion eased from October, the HSBC/Markit Purchasing Managers' Index (PMI) showed. That followed an official survey released over the weekend showing China's factory growth held at an 18-month high last month on firm domestic and foreign demand. "The data broadly says that things are stabilising in China," said Thomas Lam, chief economist at DMG & Partners Securities in Singapore. One standout in Asia was Thailand, where the SET index tumbled more than 1 percent and the baht hit a three-month low. Anti-government protesters renewed their fight to topple Prime Minister Yingluck Shinawatra, prompting riot police to fire teargas and stun grenades for a second day.
The Australian and New Zealand dollars rose sharply following the data from China. Sterling remained in focus as growing optimism about the UK economy pushed it to a five-year high against a basket of currencies. After a soft run in Asia, the dollar rebounded in Europe to $1.3545 to the euro, after weakening to $1.3616 to the euro. The dollar index rose 0.2 percent. The euro was also down against the pound, though it added about 0.1 percent against its Japanese counterpart to 139.32 yen as it moved back toward Friday's five-year high of 139.70 yen.
PAYROLLS IN FOCUS U.S. data later in the week remain a key focus. The Federal Reserve is poised to reduce its stimulus as soon as it deems the economy strong enough. Nonfarm payrolls for November, due on Friday, will be the most important. Economists expect an increase of 185,000 jobs last month, down from 204,000 in October, according to a Reuters survey of economists. In commodities trading, gold was down about 1 percent at $1,238 an ounce, undermined by concern a stronger U.S. economy will lead the Fed to reduce its stimulus. Gold has lost around a quarter of its value so far this year, on course for its first annual loss in 13 years. Copper shed about 0.6 percent to $7,013 a tonne. Brent crude oil dipped below $110 a barrel as traders weighed supply outages in Libya against U.S. inventory levels.