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GLOBAL MARKETS-Stocks dip as China slowdown deepens, German economy weak

Published 14/11/2019, 08:16 pm
© Reuters.  GLOBAL MARKETS-Stocks dip as China slowdown deepens, German economy weak
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Germany avoid technical recession

* China slowdown deepens

* European shares open lower

* FX risk off sentiment "alive and well"

By Ritvik Carvalho

LONDON, Nov 14 (Reuters) - World stocks nudged down on Thursday as Chinese economic data slowed in October and Germany only narrowly avoided a recession in the third quarter, adding to worries about the global growth fallout from the U.S.-China trade war.

MSCI'S All-Country World index .MIWD00000PUS , which tracks shares in 47 countries, was down 0.14% after start of trading in Europe.

European shares fell after data showing the German economy grew just 0.1% in the third quarter, avoiding edging into a mild contraction thanks to consumer spending, but remaining weak nevertheless. pan-European STOXX 600 .STOXX index was down 0.2%, while Germany's DAX .GDAXI fell 0.4%. .EU

"Obviously it's better than expected, but actually I would argue is that it's a hollow victory because in effect it makes a fiscal response less likely," said Michael Hewson, chief markets analyst at CMC Markets in London.

"I think if they'd gone into a technical recession, the pressure to loosen the purse strings so to speak would have been much much greater."

Bond markets also appeared to largely shrug off the growth reading, with most 10-year euro zone bond yields were down around 2 basis point in early trade, with Germany's 10-year benchmark at -0.32%. DE10YT=RR GVD/EUR

In Asia, stocks fell after soft economic data in China and Japan showed the trade war between Beijing and Washington was hitting growth in some of the world's biggest economies.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.3%. Japan's Nikkei stock index .N225 fell further, dropping 0.8%.

Australia's S&P/ASX200 .AXJO wiped earlier gains to close 0.5% higher, while Shanghai blue chips .CSI300 were up 0.15%, supported by expectations that the gloomy figures would add to the case for stimulus.

China's factory output growth slowed significantly more than expected in October, as weakness in global and domestic demand and the drawn-out Sino-U.S. trade war weighed on broad segments of the world's second-largest economy.

Fixed asset investment, a key driver of economic growth, rose just 5.2% from January to October, against expected growth of 5.4% and the weakest pace since Reuters record began in 1996. and the United States are holding in-depth discussions on a "phase one" trade agreement, and cancelling tariffs is an important condition to reach such a deal, the Chinese commerce ministry said on Thursday. industrial production growth slowed sharply in October, with the 4.7% year-on-year rise well below forecasts for 5.4%. Investment growth hit a record low and retail sales also missed expectations. weak figures also come as market confidence about a resolution being reached weakens, with a new Reuters poll showing most economists do not expect Washington and Beijing to strike a permanent truce over the coming year. offered no update on the progress of negotiations in a policy speech on Tuesday. The Wall Street Journal reported on Wednesday that talks had snagged on farm purchases. futures ESc1 were down 0.14%, following a record-high close on the S&P 500 .SPX on Wednesday. .N

Worries about spiralling violence as anti-government protests intensify in Hong Kong have also soured investor sentiment.

Protesters paralysed parts of Hong Kong for a fourth day, forcing school closures and blocking highways and other transport links in a marked escalation of unrest in the financial hub. Kong's Hang Seng .HSI fell 0.8% to a fresh one-month low.

RISK-OFF 'ALIVE AND WELL'

In currency markets, safe havens such as the Japanese yen and Swiss franc gained.

The yen JPY=EBS was quoted at 108.70 per dollar, close to a one-week high. The Swiss franc CHF=EBS traded at 0.9875 versus the greenback, near the highest in more than a week.

"Increasing signs of unrest in Hong Kong and Latin America coupled with the uncertainty around the trade talks is keeping the risk-off sentiment well and alive in FX markets," said Lee Hardman, a London-based currency strategist at MUFG.

The dollar was 0.1% lower against a basket of peers. .DXY

The Australian dollar skidded to a one-month low after a worryingly weak reading on employment re-ignited speculation about another cut in interest rates. rose after industry data showed a surprise drop in U.S. crude inventories, while comments from an OPEC official about lower-than-expected U.S. shale production growth in 2020 also provided some support. O/R

Brent crude LCOc1 futures rose 0.74% to $62.83 a barrel while U.S. West Texas Intermediate (WTI) crude CLc1 gained 0.77% to $57.56 per barrel. yield on benchmark 10-year Treasury notes US10YT=RR fell to 1.8514% compared with its U.S. close of 1.869% on Wednesday.

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