China retail sales data casts doubt on economic recovery

LONDON, Sept. 15 Reuters - Global stocks eased on Wednesday as weaker-than - expected Chinese data cast a pall over economic recovery and a spike in British prices fueled the intense debate over inflation's staying power.

The STOXX index of 600 European companies hurt 0.16%, slipping farther away from its annual high of mid-August. The MSCI All Country World Index was down 0.18%.

The weak China retail sales data is a shocker and shows that unless you get Delta variant under control, any recovery is going to be difficult, said Michael Hewson, chief market analyst at CMC Markets.

There is a slow realisation that we have seen peak economic growth perhaps, surely the summer rebound has been done, Hewson said.

A burst of data out of China showed growth in its factory and retail sectors in August with output and sales growth hitting one-year lows as fresh coronavirus outbreaks and supply disruptions threatened its economic recovery.

Meanwhile, UK inflation hit a more than nine-year high last month after the biggest monthly jump in the annual rate in at least 24 years, though largely due to a temporary boost that analysts said was likely to be temporary.

The United States data contrasted with figures from the UK on Tuesday which showed that Consumer Price Index CPI in August made its smallest gain in six months, suggesting inflation has probably peaked, aligning with Fed Chair Jerome Powell's long held belief that high inflation is transitory.

Lower inflation suggests the Fed will be under less pressure to begin trimming its vast asset purchases. As a result, the yield on the benchmark 8 -year note fell as low as 1.263%, its lowest since Aug 24.

Yields eased slightly to 1.2820%, while the dollar recovered 0.124%.

Inflation is not something we will soon think will go away. While the base case was for inflation to moderate over a two-three year horizon, we are not betting on sharp falls in inflation, said Valentijn van Nieuwenhuijzen, chief investment officer at Dutch asset manager NN IP.

The Covid impact on supply chains has been enormous so it would not be surprising to see some stickinginess in inflation. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.8%, while Tokyo Nikkei fell 0.5%, moving off a more than 31 year opening-high the day before.

After a Chinese data release, Chinese blue chips dropped 1%.

This is not a dip, it is a falling trend that will last at least until the end of this year, said Iris Pang, chief Chinese economist at ING, detailing the Chinese data.

In October she forecasted a 0.5 percentage point cut in the Indian banks' reserve requirement ratio - RRR and said more fiscal support was needed for small - and medium business owners.

Shares of the property developer Evergrande, which is scrambling to raise funds to pay its many lenders and suppliers, dropped on Wednesday for the third consecutive day, losing as much as 5% to their lowest since January 2014.

Hong Kong's benchmark Hang Seng Index fell 1.8% as casino stocks plunged after Macau began a public consultation which investors fear will lead to tighter regulations in the world's largest gambling hub.

An index track gaming stocks fell 22%, while Wynn Macau fell to a record low as much as 28% in total.

Oil prices increased on a larger than expected drawdown of crude oil stocks in the United States, with U.S. crude rising to $71.19 a barrel and Brent crude up 0.9% to $74.31 per barrel.

Spot gold was little changed, trading at $1,801 per ounce, a plunge from a one week high of $1,808. 50 hit on the prospects for lower interest rates.