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GLOBAL MARKETS-Sterling slips on election fears, downbeat China PMI weighs on stocks

stocks@

* Sterling retreats after YouGov poll shows PM May losing majority

* Asia ex-Japan flat after four sessions of losses

* Nikkei rises on weaker yen, strong economic data

* Dollar recovers but gains limited by political tensions

* Oil advances on report of decline in U.S. stockpiles

SINGAPORE, June 1 (Reuters) - Sterling retreated on Thursday on fears that Prime Minister Theresa May could lose control of parliament in Britain's June 8 election, while conflicting signals on the health of China's manufacturing sector kept most Asian stock markets in check.

Sterling retreated 0.1 percent to $1.2877 after a YouGov poll showed May could be well short of the number of seats needed to form a government, raising the prospect of political turmoil just as formal Brexit talks begin.

Other polls, however, show May winning a big majority.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat after four sessions of losses as investors took profits after stocks hit a two-year high last week and as economic and geopolitical concerns continued to weigh on sentiment.

Chinese shares fell as much as 0.4 percent after a private survey showed the country's manufacturing activity contracted in May for the first time in 11 months, contrasting with official data on Wednesday which suggested growth remained steady.

But Japan's Nikkei advanced 1 percent after data showed recurring first-quarter corporate profits were the highest on record for the January to March period.

An increase in capital expenditure in the first quarter added to a raft of recent data pointing to economic expansion, while manufacturing growth in Japan also rose to a three-month high, according to a business survey.

South Korea's KOSPI fell 0.2 percent but the Korean won remained steady at 1,119.3 won to the dollar as rising exports in May offset other data showing factory activity shrank for the 10th straight month.

"Asian equity markets have outperformed other emerging markets over the past month," Krystal Tan, Asia economist at Capital Economics, wrote in a note, while adding that further gains this year are expected to be limited.

Overnight, Wall Street closed slightly lower as financials lost ground after JPMorgan and Bank of America warned of revenue weakness in the current quarter, but gains in defensive plays offset the decline.

All three major U.S. indexes ended May in positive territory.

The dollar gained after touching a near two-week low against the yen overnight.

It was up 0.2 percent to 110.88 yen on Thursday, its first positive session in five, but concerns about U.S. politics capped gains.

President Donald Trump's administration has been the focus of independent investigations by the Federal Bureau of Investigation and several congressional panels over alleged Russian meddling in the 2016 presidential election and potential collusion by the Trump campaign.

The House intelligence committee on Wednesday approved subpoenas for Trump's former national security advisor and personal lawyer in connected with the Russian meddling probe.

The dollar index, which tracks the greenback against a basket of six major peers, inched up less than 0.1 percent to 96.993 after posting a 0.4 percent loss on Wednesday.

"The dollar remains pressured by the mounting dysfunction in Washington that has all but eliminated hopes for a bold fiscal stimulus package from the Trump administration," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Clouding the picture further was a mixed bag of economic data on Wednesday.

Pending home sales fell for a second straight month in April, hindered by a lack of supply, while an index of U.S. Midwest manufacturing activity rose in May.

The Chinese yuan continued its recent run of gains, strengthening for a fourth straight session after news that authorities are tweaking their formula for the daily reference rate in a bid to quash persistent depreciation pressure.

It was last trading at 6.7908 per dollar, its strongest level since November, after the People's Bank of China set the midpoint at 6.8090.

The euro was flat at $1.1244.

In commodities, oil prices advanced on a report that showed U.S. crude stockpiles had fallen more than expected.

That came on the heels of Wednesday's steep declines driven by after an increase in Libyan output that helped boost monthly OPEC production for the first time this year.

Global benchmark Brent advanced 1.7 percent to $51.15 a barrel after slumping 3 percent on Wednesday.

U.S. crude rose 0.8 percent to $48.70, after plunging 2.7 percent in the previous session.

Gold rose 0.1 percent to $1,262.20 an ounce. (Reporting by Nichola Saminather; Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Kim Coghill)