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Poor China data, US rates weigh on markets

New York - Weak Chinese data added to investor concerns about a looming US rate hike on Tuesday, with the euro striking a new six-month dollar low.

Key indices in the US and Europe achieved small gains but the concerns over economic conditions generally were evident.

China's consumer price index reading - the weakest since May - came two days after Beijing data showed a sharp fall in imports and exports, adding to worries about the growth slowdown in the world's second-largest economy.

Officials said prices rose 1.3% last month, down from 1.6% year-on-year in September.

In the United States, fresh data showed the downward pressure on inflation has not eased. Non-fuel import costs were down 3.2% y/y in October, the largest decline in six years.

"A key feature of global economic developments since the 2007 crisis has been the absence of inflation in the major economies," VTB Capital economist Neil MacKinnon said Tuesday.

"This reflects a number of factors, but can mostly be attributed to weak global demand and excess supply."

Apple shares hit

In New York the Dow and S&P 500 both managed 0.2 percent gains. But the Nasdaq Composite fell 0.2% due to a 3.2% tumble in its largest component, Apple, hit by a Credit Suisse report warning of lower-than-expected iPhone sales next year.

"Basically what we're seeing is a market that is struggling, and of course Apple is weighing on the indices," said economist Peter Cardillo.

London's benchmark FTSE 100 index fell 0.3%, having touched a one-month low during the day, as the China concerns weighed on natural resource companies.

Meanwhile in Paris the CAC 40 ended the day flat and Frankfurt's DAX 30 added 0.2%.

"The market decline this week has been far from dramatic, which suggests investors could be ready to pounce on the next bullish piece of market information," said market analyst Jasper Lawler at CMC Markets UK.

Traders are still betting on the US central bank tightening monetary policy in December despite broad weakness across the global economy.

"If the Fed is going for a rate hike in December many investors will now be cautious about buying into equities," said ADS Securities market strategist Nour Al-Hammoury.

But in an interview with AFP, the new chief economist at the International Monetary Fund, Maurice Obstfeld, said it would be less risky for the Fed to hold off a little longer.

"I don't see huge risks at all to waiting," he said.

"If for any reasons the Fed had to reverse that first interest rate increase, markets would interpret it as a big deal."

The euro meanwhile slumped to a fresh six-month low of $1.0675 before recovering slightly.

"Dollar bulls have re-emerged on expectations of a December rate-hike from the Fed when all other central banks, including the Bank of England, aren't even on the tightening spectrum," said Lawler.


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