UPDATE 1-Brent slips below $114 as China flash PMI retreats

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* Brent to hover above $113.59 for one more session -technicals

* Market eyes Italy election for indications on Europe situation

* Coming Up: Dallas Fed manufacturing index; 1530 GMT (Adds China data's impact on broader market, Iran talks, updates prices)

By Manash Goswami

SINGAPORE, Feb 25 (Reuters) - Brent oil fell below $114 a barrel on Monday, reversing some of the gains made in the previous session on worries about China's demand growth as manufacturing activity in the world's second biggest oil consumer pulled back from two-year highs.

The HSBC flash purchasing managers' index (PMI) for February slipped to 50.4, down from the previous month's best reading since January 2011, weighing on Asian shares and base metals. But further losses in oil were stemmed as investors waited to see if Italy's elections would produce a stable government.

Front-month Brent slipped 11 cents to $113.99 a barrel by 0549 GMT, after settling 0.5 percent higher on Friday. U.S. oil declined 2 cents to $93.11, after ending up 29 cents in the previous session.

"The reason for the decline this morning is the China PMI numbers, but prices have not lost much ground," said Ken Hasegawa, a commodity sales manager at Newedge in Tokyo.

"Oil will trade in a tight range today till Italy's election results are out. Investors want to get a sense how things will unfold in Europe."

Italians finish voting on Monday in one of the most closely watched and unpredictable elections in years, with rising concern that the ballot may not produce a government strong enough to pull Italy from its economic slump.

For the euro zone, the stakes are high.

"But further losses in oil were stemmed as investors waited to see if Italy's elections would produce a stable government.Front-month Brent slipped 11 cents to $113.99 a barrel by 0549 GMT, after settling 0.5 percent higher on Friday"Italy is the third largest economy in the 17-member bloc and the prospect of political stalemate could reawaken the threat of dangerous market instability.

Hasegawa expects Brent to trade within a tight range of $113 and $115 a barrel over the next 24 hours.

Brent is expected to hover above a support at $113.59 for one more session before breaking this level and falling to $111.97, while U.S. oil may rebound to $94.17, according to Reuters technical analyst Wang Tao.

UNITED STATES

Over in the United States, investors await testimony on Tuesday from Federal Reserve Chairman Ben Bernanke for further clues of when the Fed may slow or stop buying bonds.

Financial markets were rattled last week after minutes of the Fed's January meeting suggested some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected. Brent fell nearly 2 percent on Thursday alone, its steepest since November, during the two-day sell-off fuelled by those worries. It ended the week down 3 percent.

Markets are also worried about the outcome of budget cuts in the United States as the White House and the Republicans have so far failed to reach an agreement. The Republicans want President Barack Obama to be flexible in how cuts are made, while the White House says the law forces across-the-board cuts.

With five days left before $85 billion is slashed from U.S.

government budgets, the White House issued more dire warnings about the harm the cuts will do to Americans.

"The Italian election result and the outcome of Congressional negotiations on the automatic U.S. budget cuts are the major risk events for this week," Ric Spooner, chief market analyst at CMC Markets said in a report.

"Both have the potential to influence consensus attitudes toward global risk."

Prices are also in a narrow range ahead of talks on Tuesday between Iran and global powers to resolve the ongoing crisis over Tehran's disputed nuclear programme. The six powers, known as the P5+1, are set to offer Iran some relief from international sanctions if it agrees to curb its production of higher-grade enriched uranium.

The West says Iran's enrichment of uranium demonstrates its intent to develop a nuclear weapons capability, an allegation the Islamic republic denies.

Worries over an escalation in tension and disruption of supplies have kept Brent above $100 a barrel through most of 2012 and this year. (Editing by Tom Hogue and Himani Sarkar)

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