UPDATE 2-FTSE 100 falls to 15-week low after best August since 2014

(For a live blog on European stocks, type LIVE/ in an Eikon
news window.)

* FTSE 100 hit by strong pound, marks worst day since late
July

* Oxford Biomedica rises as AstraZeneca expands supply
tie-up

* British factory activity improves in August

* Home furnishing retailer Dunelm rises after seeing strong
sales

* FTSE 100 down 1.7%, FTSE 250 falls 1.1%
(Updates prices to close, adds comments)

By Shashank Nayar and Shreyashi Sanyal

Sept 1 (Reuters) - London's FTSE 100 fell to its lowest
level in more than three months on Tuesday, after the index had
notched its strongest August in six years, as financials weighed
and the pound scaled eight-month highs against the dollar.

The blue-chip index slipped 1.7%, marking its worst
day in a month as traders returned from a bank holiday on
Monday. The mid-cap FTSE 250 index fell 1.1%, led by
industrial, financial and consumer discretionary stocks.

Broader European markets dropped on Monday, with financials
leading the losses amid concerns over the deflationary effects
of the new coronavirus, and weak borrowing rates.

"The FTSE 100 was nursing a hangover after the Bank Holiday
as it caught up with yesterday's downbeat sentiment in the U.S.
and Europe," said Russ Mould, investment director at AJ Bell.

"Not helping the FTSE's cause was strength in sterling, a
currency move which impacts the relative weight of the overseas
earnings which dominate the index."

The FTSE 100, like its European peers, has lagged the U.S.
markets in recovering from pandemic lows as investors factor in
a prolonged economic recovery cycle due to a rash of middling
local economic data.

Meanwhile, British factory output rose in August at its
fastest pace in more than six years, albeit from a low level, a
survey showed on Tuesday.

Global stocks edged higher as data in major economies showed
manufacturing demand rebounding from coronavirus-induced lows.

Local mining majors such as BHP Group and Rio Tinto
, which supply Chinese factories, rose after the news.

Oxford Biomedica rose 1% after AstraZeneca
expanded its agreement with the company to make and supply the
drugmaker's COVID-19 vaccine candidate. AstraZeneca shares fell
1.7%.

British home furnishing retailer Dunelm rose 4.3%
after saying its sales have been strong in the last two months
and the performance this year has been ahead of its initial
expectations.
(Reporting by Shashank Nayar and Shreyashi Sanyal in Bengaluru;
Editing by Subhranshu Sahu/Uttaresh.V/Ken Ferris)