* Oil off 3-week lows before Trump decision on Paris accord
* Yuan hits 7-month high; China manufacturing contracts
* Industrials lead European shares higher
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
LONDON, June 1 (Reuters) - Oil prices rose on Thursday, lifting energy company shares, on expectations the United States will withdraw from a global pact to fight climate change, while China's yuan shrugged off weak factory data to hit a seven-month high against the dollar.
Bank shares underperformed rising European stocks, after two major U.S. lenders warned on Wednesday that low market volatility would crimp trading revenue.
Brent crude, the international benchmark for the oil market, rose off Wednesday's three-week lows in anticipation of the United States quitting the Paris accord. President Donald Trump is expected to announce his decision later on Thursday.
"If he actually withdraws the U.S from the climate accord, this would signal his intention to further roll-back emission regulations that would favour the use and demand of fossil fuels, thus giving a much needed boost to oil prices," said Jonathan Chan, investment analyst at Phillip Futures in Singapore.
A fall in U.S. crude inventories also supported prices. Brent last traded at $51.39 a barrel, up 64 cents, having touched a low of $50.31 on Wednesday.
The wider STOXX 600 index rose 0.5 percent, led higher by industrials.
European manufacturing activity grew at its fastest rate in more than six years in May, according to a euro zone purchasing managers' index.
European bank stocks were flat. Financial sector shares fell on Wall Street on Wednesday after JPMorgan blamed lower volatility for a 15 percent fall in trading revenue and Bank of America said second-quarter trading revenue was on track to be 10-12 percent down on last year.
The CBOE VIX index of implied volatility on the S&P 500 ended Wednesday at 10.41, its lowest end-month close.
Despite a stumble in recent days, especially banks and miners have led global stocks steadily higher since Trump's election in November, limiting the market swings from which traders profit.
Asian shares, as measured by MSCI's main index of Asia-Pacific shares, excluding Japan rose 0.1 percent, though gains were limited by data showing Chinese factory activity contracted in May for the first time in 11 months.
Chinese Shanghai Composite share index fell 0.5 percent after the a private survey of the manufacturing sector. The findings contrasted with official data on Wednesday which suggested growth remained steady.
China's yuan, however, strengthened beyond 6.8 per dollar for the first time since Nov. 11 after the central bank pushed its reference rate, around which the spot rate can fluctuate, 0.8 percent higher in the second-largest single-day appreciation of the currency since it was de-pegged from the dollar in 2005.
Traders said major state-owned banks were selling dollars.
"The PBOC has let the yuan bulls loose in the China shop," said Stephen Innes, senior trader at OANDA in Australia, referring to the People's Bank of China.
Spot yuan last stood at 6.7996 per dollar, having strengthened as far as 6.7878 earlier. As recently as May 24, it traded at 6.8949 per dollar.
The Chinese data also hit the Australian dollar, often seen as a proxy for the health of the world's second-biggest economy. Australia's currency fell 0.2 percent at $0.7416, having earlier fallen to $40.7384, its weakest since May 12.
Britain's pound, on a rollercoaster ride this week as polls have sent conflicting signals about the outcome of next week's election, fell 0.1 percent to $1.2874 after another poll showed the Prime Minister Theresa May's Conservatives just 3 percentage points ahead of the Labour opposition.
There was little reaction to Britain's manufacturing PMI beating forecasts.
"This data point is clearly a positive for the UK economy however GBP traders are putting macro releases on the back burner at present, with the twists and turns in the race for upcoming election having a greater impact on the market of late," David Cheetham, markets analyst at broker XTB, said.
The dollar index, which measures the U.S. currency against a basket of its peers, rose 0.2 percent.
The euro eased 0.1 percent to $1.1228 while the Japanese yen fell 0.3 percent to 111.11 per dollar.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s (Additional reporting by Nichola Saminather in SINGAPORE, Aaron Sheldrick in TOKYO; Editing by Alison Williams)