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* FTSE 100 dips as sterling rises on strong manufacturingdata
* BP, Royal Dutch Shell shares fall on weaker oil prices
* But manufacturing data lifts mid-cap FTSE 250 index
By Sudip Kar-Gupta
LONDON, Sept 1 (Reuters) - Britain's top shares index dippedon Thursday, as the market's initial gains fizzled out followinga jump up in sterling after data which showed a rebound in theUK manufacturing sector.
Sterling climbed 1 percent to hit a one-month high andtraded above $1.32 against the dollar after data showing one ofthe sharpest rebounds on record in August for the Britishmanufacturing sector.
The Markit/CIPS Purchasing Managers' Index (PMI), a closelywatched gauge of factory activity, jumped to a 10-month high of53.3 in August, recovering from the three-year low it hit inJuly after Britain's June 23 vote to leave the European Union.
That in turn weighed on the blue-chip FTSE 100 equity index, since a weaker sterling typically benefits many of theFTSE's internationally-focused and export-oriented companies.
The FTSE 100 was down 0.3 percent at 6,763.98 points in latesession trading, underperforming gains elsewhere in Europe, withthe pan-European STOXX 600 index up 0.8 percent.
The shares of oil majors Royal Dutch Shell and BP also weakened in tandem with lower oil prices.
"The FTSE is underperforming in the session driven by acombination of a stronger pound and further downside pressure oncommodities," said OANDA senior market analyst Craig Erlam.
In contrast, however, the FTSE 250 mid-cap index -which is more sensitive to the domestic UK economy than theblue-chip index - rose 1 percent after the relatively strong setof manufacturing data.
The FTSE 100 is up around 10 percent so far in 2016,although the U.S. dollar value of UK shares has been impacted bya drop in sterling in the immediate aftermath of June's Brexitvote for Britain to quit the EU. (Additional reporting by Kit Rees; Editing by RaissaKasolowsky)
