* Upbeat Chinese data boosts global recovery hopes
* European stocks slip; oil at 7-week high
* Dollar index at 8-month low as ISM seen weak
By Emelia Sithole-Matarise
LONDON, Oct 1 (Reuters) - The dollar fell to an 8-month low against a basket of currencies on Friday as traders bet a U.S. manufacturing index later in the session would be weak, while world stocks were mostly firm due to upbeat Chinese data.
Many in the market are expecting the ISM nationwide manufacturing index to fall quite substantially after a surprise increase last month, which could strengthen the case for the Federal Reserve to pump more money into a struggling economy.
China's official purchasing managers' index by contrast eased some concerns about the recovery there and propped up demand for equities and oil.
The dollar index fell as low as 78.147 <.DXY>, its weakest since January, on the view that more asset sales by the Fed -- known as "quantitative easing" -- would lead to more losses for the greenback. It was last 0.55 percent down at 78.298, having fallen more than 5 percent in September, its worst monthly performance since May 2009.
"The market clearly anticipates more quantitative easing from the Fed, just look at the dollar," said Philippe De Vandiere, analyst at IG Markets in Paris.
"But the problem is that consumer spending is not rebounding, companies are maintaining their margins by cutting costs and looking for external growth. So there's not much to support stocks these days."
The dollar's losses were heaviest against the euro, which climbed as much as 0.8 percent to $1.3763 according to Reuters data, its highest since mid-March and breaking through resistance around $1.3692, a peak hit in April.
CHINA PLEASES
Word stocks as measured by MSCI <.MIWD00000PUS> were up 0.3 percent after Japan's Nikkei <.N225> average closed up 0.4 percent after data showed China's manufacturing sector gathered momentum last month, providing further evidence that the economy is pulling out of a second-quarter slowdown. [ID:nTOE68T090]
The pan-European FTSEurofirst 300 index <.FTEU3> reversed earlier gains to stand 0.25 percent down on the day on retreating banking stocks.
U.S. shares were set to open higher, with the S&P 500 index
futures
The yield on German bonds -- the euro zone debt benchmark -- rose three bps on the day to 2.306 percent while the 10-year U.S. T-note yield was up about two bps at 2.529 percent.
The benchmark 10-year T-note yield has fallen over 20 basis points over the past month on bets that the Federal Reserve could buy up to $1 trillion in Treasuries by year-end in an effort to energise private spending and investments, which have been stagnant in the current U.S. recovery.
Oil meanwhile rose to a seven-week high, back above $80 a barrel after the Chinese numbers raised hopes of a recovery in demand in one of the world's largest consumers. Chinese markets were closed for a public holiday. (Additional reporting by Blaise Robinson in Paris; editing by Patrick Graham)