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GLOBAL MARKETS-Grim China data, Italy woes smother global stocks recovery

Published 2019-05-15, 07:57 a/m
© Reuters.  GLOBAL MARKETS-Grim China data, Italy woes smother global stocks recovery

* Pan-European STOXX 600 .STOXX index slips 0.4%

* U.S. futures point to lower opening

* China industrial output, retail sales fall short of forecasts

* Oil surge stalls on bigger-than-expected U.S. inventory buildup

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Karin Strohecker

LONDON, May 15 (Reuters) - A global equity recovery set off by softer rhetoric from U.S. President Donald Trump on the trade dispute with Beijing waned on Wednesday as grim Chinese data and fresh Italian debt woes cast a shadow over global markets.

Concern that the world's two biggest economies could end up in a protracted trade war has been keeping markets on edge. Investors took some comfort from Trump's calling the dispute with Beijing "a little squabble" on Tuesday and insisting talks had not collapsed. data from China showing surprisingly weak retail sales and industrial output growth weighed on markets and added pressure on Beijing to roll out more stimulus. to the woes are fears over Italy's fiscal situation after Rome said it was ready to break European Union fiscal rules to spur employment. stocks fell .FTMIB 0.8% to lead European stocks lower. Germany's DAX .GDAXI eased 0.4%, shrugging off data confirming the German economy had returned to growth in the first quarter, which helped the euro zone economy accelerate quarter-on-quarter France's benchmark .FCHI slipped 0.3% while London's FTSE .FTSE traded flat.

"Investors had been waiting for data to confirm signs of stabilisation in the Chinese economy which, in turn, would bolster expectations that the global economy could start making a sustainable recovery," said Neil McKinnon at VTB Capital.

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"The recent escalation in tariffs makes that more difficult and can only add to investor risk aversion and increase the risk of a more prolonged economic downturn."

U.S. futures ESc1 pointed to a softer open on Wall Street, following healthy gains the day before. MSCI's broadest index of world stocks traded flat .MIWD00000PUS .

In currency markets, the Australian dollar AUD= - a proxy of China-related trades - fell to its lowest in more than five months.

The U.S. dollar traded at 109.38 yen JPY= , having pulled away from Monday's three-month low of 109.020, when trade war worries boosted demand for the safe-haven Japanese currency. FRX/

The Chinese yuan was down at 6.9138 per dollar in offshore trade CNH=D4 , grinding back towards Tuesday's five-month trough of 6.9200. The euro held at a one-week low EUR= while the dollar index against a basket of six major currencies was nearly flat at 97.555 .DXY after gaining 0.2% the previous day.

The pound GBP= revisited a two-week low hit on Monday after Prime Minister Theresa May's spokesman said late on Tuesday she planned to put her proposed Brexit deal -- already rejected three times -- before parliament in early June.

In commodities, U.S. crude futures fell nearly 1 percent to $61.25 per barrel CLc1 after the American Petroleum Institute (API) reported a bigger-than-expected increase in crude inventory. O/R

U.S. crude stockpiles rose by 8.6 million barrels in the week to May 10 to 477.8 million, compared with expectations for a decrease of 800,000 barrels. crude LCOc1 lost 0.4% to trade at $70.96 per barrel.

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Brent and U.S. crude futures had surged the previous day after Saudi Arabia said explosive-laden drones launched by a Yemeni-armed movement aligned with Iran had attacked facilities belonging to state oil company Aramco.

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