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GLOBAL MARKETS-Stock market gains capped by tech, Europe; US dollar weakens

* Banks, miners lift Europe shares; Wall St flat

* China data helps push copper to two-year high

* Dollar dips to stay near 13-month lows (Updates with close of European markets)

NEW YORK, July 31 (Reuters) - Gains in world equity markets were capped by fading European markets and retreating U.S. technology shares, while the U.S. dollar fell to its lowest level since January 2015 against the euro.

European shares initially gained on a boost from HSBC, as Europe's biggest bank unveiled a 5-percent rise in half-year profits and a third share buyback in a year. But shares later retreated amid weakness in tobacco stocks and some broker downgrades.

HSBC shares were up 1.8 percent after earlier gaining nearly 4 percent in London trading.

The pan-European FTSEurofirst 300 index lost 0.11 percent, while MSCI's gauge of stocks across the globe gained 0.13 percent. MSCI's index was poised for its best month in a year while the FTSEurofirst suffered its biggest monthly decline since June 2016.

On Wall Street, banks were also a bright spot, with the S&P financial index up 0.83 percent as the best performing of 11 major sectors, although equities overall lost some ground.

Weakness in technology stocks such as Facebook, down 1.8 percent and Apple, off 0.7 percent, curbed gains on the broader index and pushed the Nasdaq into negative territory.

"It's just a matter of the fact that they have had a very strong run," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

"The bull market is sort of broadening out and people are taking a few profits off the table on some of these stocks that have done exceedingly well."

The Dow Jones Industrial Average rose 86.44 points, or 0.4 percent, to 21,916.75, the S&P 500 gained 0.49 points, or 0.02 percent, to 2,472.59 and the Nasdaq Composite dropped 23.55 points, or 0.37 percent, to 6,351.12.

TOBACCO COMPANIES DROP

Shares of world tobacco companies continued to weigh, after the U.S. Food and Drug Administration proposed on Friday to cut nicotine in cigarettes to non-addictive levels.

British American Tobacco fell 5 percent, after dropping 6.8 percent on Friday, and Imperial Brands fell 5.9 percent. In the U.S., Altria Group, off 2.4 and Philip Morris, down 0.9 were among the top drags on the S&P 500.

Mining companies in London inched higher, with an index of their shares up 0.34 percent, as copper hit a fresh two-year high after Chinese data showed that while manufacturing growth cooled slightly this month, a government infrastructure push kept construction moving.

Copper rose 0.75 percent to $6,372.50 a tonne, having risen as high as $6,430.

The dollar index fell 0.28 percent, with the euro up 0.54 percent to $1.1813.

Benchmark 10-year notes Benchmark 10-year notes last fell 2/32 in price to yield 2.2924 percent, from 2.287 percent late on Friday ahead of a heavy week of data, which will culminate in Fridays employment report for July.

Oil prices declined by held near two-month highs. Oil earlier climbed as news of a producers' meeting next week added to bullish sentiment driven by the threat of U.S. sanctions against OPEC-member Venezuela.

U.S. crude fell 0.78 percent to $49.32 per barrel and Brent was last at $51.85, down 0.71 percent on the day.

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)