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GLOBAL MARKETS-Share rally peters out, euro lifted by PMI boost

* Euro zone PMI bolsters recovery prospects, lifts euro

* China PMI shows economy still stuttering

* Aussie dollar plunges after inflation surprisingly low

* U.S. stocks expected to see flat start, earnings deluge eyed

LONDON, April 23 (Reuters) - European shares edged down on Wednesday after three days of gains as signs of a still stuttering Chinese economy and rising worries about Ukraine offset a reassuring set of European economic numbers. Having raced higher on Tuesday on a wave of takeover activity, European stocks fell 0.3 percent as investors locked in some of the gains and turned their attention to the region's broader economic outlook. U.S. stock futures pointed to a flat start for Wall Street on what will be another heavy day of company earnings as well as U.S. PMI readings.. Data compiler Markit's equivalent readings for Europe, seen as good indicators of future growth, showed that while France's economy was still lagging, Germany continued to power the euro zone's recovery. The PMI numbers showed the bloc's private sector has started the second quarter on its strongest footing in nearly three years, although burgeoning new orders were again mainly buoyed The data lifted the euro and the region's government bonds London's FTSE share index held its ground, but the pan-European FTSEurofirst was pulled back by a 0.4 percent drop by Paris's CAC 40 and 0.3 percent falls in Frankfurt and Milan. "It's pretty encouraging considering what we have seen for years. We are looking at 0.5 percent quarter-on-quarter GDP growth if we continue to see this level," said Chris Williamson, chief economist at Markit. "Clearly we should see the pace of growth continue into May and possibly June as well. Companies are beginning to feel this is something sustainable."

DELICATE CHINA In Asia, the main economic data of the day had been less encouraging. China's stock markets fell 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, and the country's central bank moved again to keep its currency ticking lower. 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 as it tumbled to a two-week low after data showed surprisingly low inflation. The currency slid more than one U.S. cent to $0.9277 and interbank futures <0#YIB:> rallied as the market pared back the risk that the Reserve Bank of Australia will have to raise interest rates before year-end. "The fall in the Aussie was quite large considering that interest rate markets weren't pricing a hike until mid-2015 anyway," said Sean Callow, currency strategist at Westpac. "The slide gives the impression that Aussie bears have been waiting for a reason to bash it." Back in Europe, the euro bounced to $1.3845 as the upbeat PMI data countered the recent talk of interest rate cuts from ECB policymakers. And across the English Channel the pound was enjoying the view near a four-year high as the Bank of England flagged how Britain's economy was gaining speed.

UKRAINE STRAINS The sobering economic news on China added to a host of country-specific issues to drag down most emerging Asian currencies and put EM stocks in the red for a third day.

The Indonesian rupiah fell to its weakest level in more than seven weeks due to increasing month-end dollar demand, while Turkey's lira hovered near 3-week lows as traders awaited a rate decision from the country's dovish central bank. In commodity markets, Brent crude held above $109 a barrel, just off a six-week high of $110.36 hit last week, cushioned by continued concerns over the stand-off in Ukraine. The U.S. 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. That kept Ukrainian and Russian assets firmly under pressure. Stocks in Moscow fell 0.6 percent to a one-week low while Russia's central bank shifted its target exchange rate as it continued interventions to steady the rouble. 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.

(Additional reporting by Jonathan Cable; Editing by John Stonestreet)