Financial markets kicked off September in a cautious mood on Thursday with European stocks lower and world equities struggling to keep up what would be a five-day winning streak.
MSCI's all-country world stock index <.MIWD00000PUS> was down 0.1 percent, having registered a nearly 9 percent gain since its early August low.
The index is down 6 percent on the year, however, and global stocks in August fell more than 7.5 percent, their biggest monthly decline since May 2010.
Investors entered the month in one of the most bearish moods in recent times. Reuters asset allocation polls on Wednesday showed leading fund companies were holding less than 50 percent of their mixed-asset portfolios in stocks.
Sentiment has been battered over the summer by signs of a deteriorating global economic environment and by the euro zone's inability to contain its debt crisis.
A raft of economic data was due over the next two days -- culminating in the monthly U.S. jobless report on Friday -- that should give investors guidance as to how far the global economy has slipped.
China saw a modest improvement in factory activity in August, according to a purchasing managers' survey released on Thursday, but early euro zone data was showing weakness.
The China PMI data gave some immediate relief to the market, but the U.S. data, particularly the employment numbers, are still to come, said Yutaka Shiraki, senior equity strategist at Mitsubishi UFJ Morgan Stanley Securities.
The improved China data pushed oil prices to a one-month high, with Brent crude trading above $115 a barrel as it raised expectations that growth in the world's largest energy consumer could offset a slowdown in major developed economies.
The pan-European FTSEurofirst 300 <.FTEU3> was down around 0.2 percent. It lost 11 percent in August, its biggest monthly percentage drop since October 2008 after the collapse of investment bank Lehman Brothers.
Japan's Nikkei <.N225> earlier closed up 1.18 percent.
The euro eased against the dollar, taking its cue from lower stock markets.
The yen stayed under pressure on dollar buying by Japanese accounts, lifting the dollar to around the 77 yen level and soothing jitters that another round of intervention by Tokyo authorities may soon be on the way.
The Swiss franc -- seen as a safe-haven currency -- was firm against the euro, but lost ground against the dollar with investors wary of any intervention by the Swiss National Bank.
On bond markets, peripheral euro zone debt was set to come under scrutiny. Spain was returning to the market to sell a new 5-year bond after an Italian auction this week saw relatively weak demand.
Spain's Treasury is looking to sell 3-4 billion euros of the paper at its first auction since August 4. Regular buying of Spanish and Italian bonds in recent weeks by the European Central Bank has kept yields on their 10-year benchmark bonds around 5 percent.
(Editing by Susan Fenton)