A global equity bounce stemming from softer rhetoric by US President Donald Trump on the trade dispute with Beijing waned on Wednesday as grim China data and fresh Italian debt woes cast a shadow over global markets.
Concerns that the world's top two economies could career into a fierce and protracted trade war has kept markets on edge over the past days. Investors had taken some comfort from Trump calling the trade dispute with Beijing "a little squabble" on Tuesday and insisting talks had not collapsed. But 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.
Adding to the woes are fears over Italy's fiscal situation after Rome said it was ready to break EU fiscal rules to spur employment.
Italian stocks declined 0.7% to lead European stocks lower while France's benchmark slipped 0.4%. Data confirming that Germany's economy had returned to growth in the first quarter cushioned the DAX which eased 0.2%. London's FTSE rose 0.2%.
"Investors had been waiting for data to confirm signs of stabilization 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.
"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."
The souring mood also looked to spill over to Wall Street with US futures pointing to a softer open following healthy gains in the previous session. MSCI's broadest index of world stocks traded flat.
In currency markets, the Australian dollar - a proxy of China-related trades - fell to its lowest level in three months amid the China data fallout.
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