* Euro zone PMI bolsters recovery prospects
* China PMI shows economy still stuttering
* Aussie dollar plunges after inflation surprisingly low
* Risk sentiment bolstered by gains in US, Europe
LONDON, April 23 (Reuters) - European shares edged down on Wednesday after three days of gains as data showing China's economy was still stuttering offset some broadly reassuring European purchasing manager index (PMI) numbers.
Having raced higher on Tuesday on a wave of takeover activity, European stocks started the day down 0.2 percent as investors locked in some of the gains and turned their attention to the region's broader economic outlook.
Data compiler Markit's monthly PMI figures, seen as good indicators of future growth, showed that while France's economy was still a drag, Germany was continuing to power the euro zone's recovery. 1/8ID:nL9N0MI019 3/8
London's FTSE eked out a 0.15 percent rise but the pan-European FTSEurofirst was pulled back by Paris's CAC 40 which dropped 0.3 percent and cast a shadow over its broadly steady continental counterparts in Frankfurt , Madrid and Milan.
In Asia, China's stock markets had fallen again and the yuan tumbled to 16-month low after a survey showed manufacturing activity in the world's second-biggest economy was still slowing in April.
The HSBC/Markit flash Purchasing Managers Index (PMI) for April rose to 48.3 from March's final reading of 48.0, but was still below the 50 line separating expansion from contraction.
The Australian dollar caught the eye too as it tumbled to a two-week low after data showed surprisingly low inflation.
In commodity markets, Brent crude held above $109 a barrel, just off a six-week high of $110.36 last week, cushioned by continued concerns over the stand-off in Eastern Ukraine.
The United States threatened Russia with more sanctions on Tuesday and Ukraine's government said on Wednesday it was restarting an "anti-terrorist operation" to eliminate armed pro-Russian separatist groups in the east of the country.
Gold remained out of favour after touching its lowest in more than two months on Tuesday, weighed down by this week's gains in Wall Street stocks and as outflows from physical gold funds pointed to weak investment appetite.
(Reporting by Marc Jones; Editing by John Stonestreet)