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European stocks and U.S. futures slip

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Payrolls data could decide size of Fed rate cut

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Dollar dips and euro rises

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September traditionally a weak month

(Updates at 1405 GMT)

By Harry Robertson and Wayne Cole

LONDON/SYDNEY, Sept 2 (Reuters) - Share markets fell

slightly on Monday as investors braced for a data-packed week

culminating in a U.S. jobs report that could decide whether a

rate cut expected this month will be regular or super-sized.

Survey data released on Saturday showed Chinese

manufacturing activity sank to a six-month low in August, and

data on Monday showed euro zone factories are also still

struggling.

Wins for the populist parties in German state elections

added a fresh layer of political uncertainty in European

markets, while a holiday in the United States and Canada made

for thin liquidity.

Europe's STOXX 600 index fell 0.21%, after hitting

a record high on Friday. Germany's DAX and Britain's

FTSE 100 were down 0.1% and 0.2% respectively.

"European equities have opened on a weaker footing owing to

weaker economic data from China," said Aneeka Gupta, equity

strategist at WisdomTree. "The industrials and consumer

discretionary sector led the declines."

The dollar index, which tracks the currency against

six peers, was down very slightly at 101.68 after hitting a

two-week high overnight. The U.S. currency climbed 0.55% against

the yen to 146.96.

"We are seeing some natural caution at the beginning of a

critical month for markets, with the Fed set to start its

interest rate cutting cycle," said Ben Laidler, head of equity

strategy at Bradesco BBI.

"Markets made a dramatic recovery from the early August

flash sell-off but now face seasonally by far the weakest

performance month of the year."

Chinese stocks lost 1.7%, led by losses in real

estate after a survey showed home prices growth had slowed.

Shares of New World Development ( NWWDF ), a major Hong Kong

property developer, dived 14% after it estimated a net loss.

Futures for the U.S. S&P 500 index were down 0.1%,

while those for the tech-laden Nasdaq 100 were flat.

U.S. stock markets were closed for Labor Day on Monday and

Treasuries were untraded.

"We're always a bit cautious when we're trading at all time

highs and when earnings expectations continue to be fairly lofty

in the U.S. in particular," said said Carl Hammer, head of asset

allocation at lender SEB.

The big event of the week will be the U.S. non-farm payrolls

report on Friday, which is expected to show the economy added

165,000 jobs in August, up from 114,000 in July.

Traders currently think a September Federal Reserve rate cut

is nailed on and see a 33% chance that it could be an outsized

50-basis point reduction, but that could shift on Friday.

The weak July jobs report helped spark a sell-off in global

stocks at the start of August, although the S&P 500 has since

rebounded to sit 0.4% off a record high.

Germany's 10-year bond yield rose to its highest

in a month at 2.349%, up 6 basis points.

Pressure mounted on German Chancellor Olaf Scholz after the

far-right Alternative for Germany (AfD) won its first regional

election.

September has recently been a down month for stocks and

bonds, analysts said, perhaps adding to the caution on Monday.

Deutsche Bank analysts said the S&P 500 and STOXX 600 have

lost ground in each of the last four Septembers, while global

bonds have fallen in the last seven.

Also important this week will be U.S. survey data, job

openings figures, weekly jobless claims and the Fed's beige book

on current economic conditions.

Oil prices were little changed after falling in recent days.

Brent crude held steady at $76.91 a barrel, down more

than 5% from a week earlier.