(Updates markets activity, changes headline)

* Euro zone, British factory PMIs dip

* U.S. surveys point to ongoing growth

* China, Indonesia manufacturing PMIs hit multi-month lows

* Japan business outlook weaker as sales tax rises

By David Gaffen, Jonathan Cable and Adam Rose

NEW YORK/LONDON/BEIJING, April 1 (Reuters) – Manufacturing
in Asia and Europe finished the first quarter on a weaker note
but activity in the United States remained relatively steady,
suggesting severe winter weather in North America had only a
modest effect on U.S. factories.

Factories across Europe eased back on the throttle in March
while China’s vast manufacturing industry contracted for a third
straight month, surveys showed, fueling expectations
policymakers may be forced to act in coming months.

The performance in the U.S. contrasts with the lackluster
data elsewhere and arguably gives U.S. monetary authorities more
room to reduce stimulus than their central banking counterparts
abroad, who are trying to prop up growth.

U.S. markets judged the news as positive. Stocks added to
gains to push the SP 500 to a new intraday record, and the
dollar edged higher.

“It is consistent with an economy making progress but one
growing between 2 and 2.5 percent,” said Richard Franulovich,
senior currency strategist at Westpac Banking Corp in New York.

“That’s respectable but not as much as the Fed would like.”

The two U.S. surveys, one from Markit and one from the
Institute for Supply Management, contradicted each other in
spots, but both overall figures were solidly above 50,
indicating ongoing growth.

The weak performance of China’s massive manufacturing sector
remains a primary concern for the global economy. The final
Markit/HSBC PMI gauge of factory activity fell to an eight-month
low of 48.0 in March, and has remained below the 50 level since
January.

The official survey, which is geared towards bigger,
state-owned firms, showed a marginal increase to 50.3 from 50.2,
but economists warned that given seasonal patterns it too could
be taken as a sign of weakness rather than improvement in the
world’s second-biggest economy.

“Overall, both March PMI readings further underpin the weak
start to the year experienced by the Chinese economy. They also
increase the pressure on the Chinese authorities to stimulate
the economy,” said Nikolaus Keis, an economist at UniCredit.

Investors are betting China will try to arrest the loss of
momentum after what has shaped up to be its worst quarter in
five years.

Last week, Premier Li Keqiang said Beijing had the necessary
policies in place and would push ahead with infrastructure
investment, after recent weak economic data and mounting signs
of financial risks clouded the nation’s outlook.

“The PMIs have given a steer on the Chinese economy for a
while and it is looking like the People’s Bank of China will
take some action,” said Philip Shaw at Investec.

STRONG U.S. GROWTH

Markit’s final reading on U.S. factory growth in March fell
to 55.5 from 57.1 in February, while ISM’s survey rose to 53.7
in March from 53.2 in February.

Markit noted a slight dip in new orders and output growth,
while ISM said its new orders subindex rose marginally. More
concerning was the drop in the ISM employment subindex to 51.1,
the weakest since June 2013, from 52.3.

Other markets across the Americas posted improved figures.
The pace of growth in Canada picked up in March thanks to rising
new orders, with the RBC Canadian Manufacturing PMI rising to
53.3 from 52.9 in February.

Brazil’s manufacturing activity expanded for the fourth
straight month in March, with the HSBC PMI rising to 50.6 in
March from 50.4 in February, even as new order growth slowed.

Output again rose across the board in the euro zone,
suggesting its recovery is becoming entrenched, but Markit’s
Purchasing Managers’ Index (PMI) also revealed that factories
were once more cutting prices.

The bloc’s final manufacturing PMI came in at 53.0, matching
an earlier flash reading but below February’s 53.2, while the
output price sub-index dropped below the 50 mark that separates
growth from contraction for the first time since August.

Euro zone inflation fell to just 0.5 percent last month, its
lowest since November 2009 and well below the European Central
Bank’s target of just below 2 percent.

The ECB is expected to keep monetary policy unchanged on
Thursday despite calls for it to act to support growth. Olli
Rehn, the EU’s top economic official, added to that pressure on
Tuesday, saying prolonged low inflation would make it harder to
correct imbalances in the euro zone.

Growth in British manufacturing unexpectedly eased to its
slowest pace in eight months and prices paid by factories
tumbled, giving the Bank of England scant reason to adjust its
loose policy stance.

SENTIMENT WEAK IN JAPAN

In Japan, the closely watched central bank tankan survey
showed business sentiment barely improved in the three months to
March and was set to sour this quarter following an increase in
sales tax that took effect on Tuesday. The tax hike was put in
place to shore up government revenues and help lift Japan out of
years of deflationary stagnation.

Big manufacturers and non-manufacturers in Japan expect
conditions to worsen in the three months ahead, keeping alive
expectations the Bank of Japan will boost its massive monetary
stimulus to sustain recovery in the world’s No. 3 economy.

Japan’s Markit/JMMA Manufacturing PMI pulled back further
from January’s eight-year high as heavy snow in some areas
curbed production.

Factory PMI surveys for Asia’s third and fifth-largest
economies India and Indonesia also came in softer, with India’s
index still in growth territory, but Indonesia’s hitting a
seven-month low.

However, South Korea, Asia’s fourth-largest economy and one
of its leading manufacturing and export powerhouses, managed to
buck the trend as its HSBC/Markit manufacturing gauge rose.

(Additional reporting by Asher Levine in Sao Paulo, Michael
O’Boyle in Mexico City, Richard Leong and Michael Connor in New
York, Andy Bruce in LONDON, Leika Kihara and Tetsushi Kajimoto
in TOKYO, Rieka Rahadiana in JAKARTA, Se Young Lee in SEOUL, and
Sarmista Sen in BANGALORE; Editing by Catherine Evans and
Meredith Mazzilli)