Global stocks are dropping after Chinese factory prices fall, stoking fears deflation is spreading

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Global stocks are dropping after Chinese factory prices fall, stoking fears deflation is spreading

FILE - In this Tuesday, Aug. 13, 2019, file photo trader Andrew Silverman works on the floor of the New York Stock Exchange. The threat of a recession doesn't seem so remote anymore, and stocks sank Wednesday after the bond market threw up one of its last remaining warning flags on the economy's health. (AP Photo/Richard Drew, File)

Associated Press

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  • World stocks slid on Tuesday as traders reacted to falling prices of Chinese manufactured goods and disappointing French industrial production data.
  • China's producer price index dropped 0.8% in August, the sharpest decline in three years, as the country's trade war with the US weighed on demand for factory products.
  • French industrial production rose 0.3% in July, falling short of the 0.5% rise that analysts expected.
  • View Markets Insider's homepage for more stories.

World stocks slid on Tuesday as traders reacted to falling prices of Chinese manufactured goods and disappointing French industrial production data.

China's producer price index dropped 0.8% in August - the sharpest decline in three years, according to Reuters - as the country's trade war with the US tempered interest in factory products, forcing businesses to cut prices.

"The fear is not just that it signals weakness in domestic and overseas demand, but that China is exporting deflation by cutting prices and making it even harder for central banks like the ECB to achieve their inflation goals," Neil Wilson, chief market analyst for Markets.com, said in a morning note. "Could be a tough session in Europe."

Meanwhile, French data showed industrial production rose 0.3% in July, falling short of the 0.5% rise expected by analysts polled by Reuters.

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News of the surprise slowdown in growth comes ahead of the European Central Bank's expected unveiling of a batch of stimulus measures on Thursday, which are intended to relieve the pressures of the US-China trade war and Brexit chaos on global growth.

Analysts expect the US Federal Reserve to take a similar tack and cut interest rates next week.

As the US-China trade war shows no signs of abating, the Chinese government mouthpiece newspaper, the People's Daily, on Tuesday slammed comments by a US adviser to Donald Trump, Peter Navarro, accusing him of trying to sabotage talks to resolve the dispute. In a Yahoo Finance interview, Navarro had accused China of currency manipulation and other "deadly sins" on Sunday.

"All these preposterous comments are not constructive at all, and go against the larger direction of the two sides taking real action to create favorable conditions for the negotiations," the newspaper wrote, according to Bloomberg.

Here's the market roundup as of 10:46 a.m. in London (5:46 a.m. EST):

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  • European equities have dropped with Germany's DAX, and Britain's FTSE 100 down around 0.3%. The Euro Stoxx 50 was down 0.4%, and France's CAC Index slumped 0.6%.
  • The British pound is steady at about 1.23 to the US dollar after Prime Minister Boris Johnson's bid for an early general election failed, resulting in his sixth successive Commons defeat.
  • Asian indexes were broadly lower with the Shanghai Composite down 0.1%, and the SZSE Component and China A50 down 0.4%. Hong Kong's Hang Seng was flat, while Japan's Nikkei rose 0.4%.
  • US stocks are set to open lower. Futures underlying the Dow Jones Industrial Average, Nasdaq and S&P 500 fell 0.3%.
  • Oil prices jumped with West Texas Intermediate crude up 0.4% at $58.10, and Brent crude up 0.2% at $62.70.
  • Gold slid 0.5% to around $1,503.

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