* MSCI world equity index down 0.20 pct at 274.23
* Yen holds near 7-week high against dollar, oil edges up
* China data upbeat after Monday stocks slide
By Carolyn Cohn
LONDON, Sept 1 (Reuters) - Global stocks eased on Tuesday as
buoyant shares and economic data in China failed to erase
concern over the durability of the recent rally, while the yen
held firm after a landslide election win for Japan's opposition.
The MSCI world equity index <.MIWD00000PUS> came under
pressure on Monday following a near-7 percent decline in the
onshore Chinese stock index <> -- the worst one-day loss
since mid-2008.
The world equity index crept another 0.2 percent lower by
0845 GMT on Tuesday but held above 10-day lows set in the
previous session.
Fears persist that the Chinese government is reining in bank
lending to head off potential asset bubbles but data on Tuesday
showed the Chinese economy maintained its upward momentum in
August, with two purchasing managers' indexes rising to their
highest levels in 16 months. []
World stocks have rallied more than 3 percent in August to
10-month highs and over 35 percent since the end of March, on
signs the global economy may be emerging from recession.
But investors are worrying that the rally in both global and
European stocks may be running out of steam.
"There's nervousness about the gains given the low
volatility over the summer," said Richard Hunter, head of
equities at Hargreaves Lansdown.
"Investors will take a long hard look at the rally over
August, and when we see a move back to risk aversion, there's a
move back into defensives."
Oil gained 0.34 percent <CLc1> to $70.21 a barrel, after
falling almost 4 percent on Monday.
The FTSEurofirst 300 index <> erased early gains to
fall over 1 percent. September Bund futures benefited from the
drop in equities, rising 17 ticks <FGBLU9>.
YEN FIRM POST-ELECTION
The yen softened but held near a seven-week high against the
dollar <JPY=> hit on Monday after a victory at the weekend by
Japan's opposition Democratic Party.
The yen weakened around 0.17 percent to 93.15 per dollar and
133.60 per euro <EURJPY=>. The euro was steady against the
dollar at $1.4335 <EUR=>.
Reviving the Japanese economy is the Democratic Party's top
priority with unemployment at a record high and investors
concerned about deflation and whether the new government will
raise spending and increase still further the country's soaring
public debt. []
Investors are watching to see whether economic policies will
be sufficient to bolster the global equities rally.
"Some warning signs have begun to emerge that suggest we may
be facing a near-term correction, such as the breakdown in the
Chinese stock market and the possibility that the world is at
the forefront of a new interest rate policy tightening cycle,"
said Bob Doll, chief investment officer of equities at
BlackRock, in a client note.
"We have little doubt that markets will remain volatile, but
as long as policymakers remain focused on the downside economic
risks, we expect the positive factors will outweigh the
negatives."
(Additional reporting by Simon Falush, editing by Mike Peacock)
