* World shares ekes out small gains
* Chinese data disappoints, lifting yen
* Dollar lower with eyes on this week's Fed meeting
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 11 (Reuters) - World stocks ticked slightly higher on Tuesday and Japan's Nikkei hit a 10-month closing high despite disappointing Chinese data that drove up the yen.
European shares gained, as did the euro. The dollar was lower across the board, a break from recent trends in which it has risen on bearish economic news.
China's industrial output grew at the fastest rate in nine months in July but fell short of expectations, disappointing some in the market.
One result was that currency dealers unwound some trades that had favoured high-yielding currencies such as the Australian and New Zealand dollar.
This lifted the yen across the board, but failed to dent sentiment on Japan's bourse. The Nikkei rose 0.6 percent or 61.20 points to 10,585.46, its highest finish since Oct. 3.
The generally upbeat equities mood carried over into Europe where the pan-European FTSEurofirst 300 index of top shares was up 0.3 percent.
But trading was generally muted because of the northern hemisphere's summer lull.
"The market is in keeping a low profile at the moment," said Postbank equity strategist Heinz-Gerd Sonnenschein.
It all took the MSCI-all-country world index, the global benchmark for many investors, up about 0.2 percent.
The index has gained nearly 19 percent this year and is up around 58 percent since hitting a low in March. This has investors divided about whether a bull market is in the making or whether bourses are heading for a fall.
"We do have concerns about the sustainability of the rally, but we would also point out that valuation measures remain attractive and that there is still a large amount of cash on the sidelines waiting to be invested," Bob Doll, global chief investment officer for equities at BlackRock, said in a note.
"As a result, we believe the current cyclical bull market remains intact."
DOLLAR DOWN
The dollar was down around 0.2 percent against a basket of major currencies primarily as a result of the euro gaining 0.2 percent to $1.4165 and the yen rising about a third of a percent to 96.80 yen.
Currency traders are also looking ahead of the end of the Federal Reserve's two-day policy meeting on Wednesday.
After better than expected U.S. jobs data last week and a sharp rise in the dollar, the market has been trying to ascertain whether the rising risk appetite-falling dollar dynamic which has held for much of this year has started to crumble.
The market has even begun to price in tightening by the Federal Reserve early in 2010.
"Whether a paradigm shift is taking place with regards to a loosening in correlation between risk aversion and the U.S. dollar is still too early to call," said Jonathan Cavenagh, a currency strategist at Westpac, Sydney.
Euro zone government bond yields were flat to slightly higher.
The two-year Schatz yield was at 1.539 percent and the 10-year at 3.498 percent.
(Additional reporting by Charlotte Cooper and Christoph Steitz; Editing by Andy Bruce)
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