By Nigel Stephenson LONDON (Reuters) - Stocks worldwide began the fourth quarter on a negative note on Wednesday, as lackluster economic data and civil unrest in Hong Kong kept investors cautious before a European Central Bank meeting later this week.
The dollar held close to a four-year high, helped by the weak factory activity data, pushing commodity prices lower.
The pan-European FTSEurofirst 300 equity index was down 0.2 percent after final September purchasing manager numbers from France, Germany and the euro zone as a whole underlined the fragility of the European recovery.
The numbers, along with slowing euro zone inflation data on Tuesday, highlighted the divergent monetary policy outlook between the U.S. Federal Reserve on the one hand and the European Central Bank and Bank of Japan on the other.
"Since the Fed meeting on Sept. 17, we've seen a 'risk-off' trade, with the fixed income market playing its role of 'safe-haven' while equities and commodities have been slipping in negative territory," said Ycap Asset Management's head of quantitative strategies in Paris, Gregory Raccah.
The European Central Bank meets on Thursday.
"Once again, the central bank will have to convince investors that it has the firepower to stave off deflation risks. We'll wait for Thursday's ECB meeting before buying the market," said Barclays France director Franklin Pichard.
Manufacturing stumbled across most of Asia in September. The closely watched Chinese PMI stayed stuck at 51.1, only modestly above the 50 level that separates growth from contraction.
MSCI's main index of Asia-Pacific shares outside Japan fell 0.2 percent. In Tokyo, the Nikkei stock index closed 0.6 percent lower. Big Japanese manufacturers were slightly more optimistic in the third quarter, but service-sector sentiment worsened, a central bank survey showed.
Chinese stock markets were closed for a national holiday but investors warily monitored thousands of pro-democracy protesters in Hong Kong, where demonstrations spread.
U.S. shares closed the third quarter on a downbeat note, dragged lower by energy and materials shares as consumer confidence fell in September for the first time in five months and home prices rose less than expected in July. (N)
The dollar, riding high in recent weeks, topped 110 yen for the first time in six years. The Japanese currency was last down 0.1 percent at 109.77 yen.
The euro, which plumbed a two-year low under $1.26 on Tuesday after the euro zone inflation data was seen making ECB monetary stimulus more likely, was down 0.2 percent at $1.2612.
PAYROLLS
Analysts said U.S. jobs data due on Friday would be crucial for the dollar's near-term prospects.
"Friday's non-farm payrolls will be key, as it could raise rate hike expectations another notch," said Barclays Bank chief Japan FX strategist in Tokyo, Shinichiro Kadota.
Dollar strength and concern over growing supply have weighed heavily on Brent crude oil lately. The Chinese PMI data lifted it towards $95 a barrel on Wednesday. It last traded at $94.90, up 0.2 percent on the day.
"The Chinese data is slightly supportive, but Brent is solidly in a downtrend and that could continue," said Tony Machacek, an oil broker at Jefferies Bache in London.
Falling oil prices have hit Russia's rouble. The currency slipped to 44.43 against a dollar-euro basket at Wednesday's opening, moving beyond the level of 44.40 at which the central bank automatically starts unlimited interventions to defend the currency.
The strong dollar also took its toll on gold. The metal traded at $1,208.40 an ounce, having hit a none-month low on Tuesday.
(Additional reporting by Lisa Twaronite in Tokyo and Blaise Robinson in Paris; Editing by Louise Ireland and Crispian Balmer)