* European shares slip, pound extends slide
* Chinese trade data raises more FX weakness concerns
* Asian FX hit by U.S. rate view; Thai baht in focus
* Risk aversion pushes Japanese yen higher
By Marc Jones
LONDON, Oct 13 World stocks stumbled to
three-week lows on Thursday and developed market bond yields
dipped, after Chinese data showed a sharp decline in exports,
reviving concerns about the health of the world's second-biggest
Riskier assets have had a difficult few weeks, undermined by
concerns about a potential rise in U.S. interest rates, the
outcome of U.S. elections, Britain's departure from the EU and
the health of German and Italian banks.
Asia's markets suffered falls overnight after data showed
Chinese imports in dollar terms were back in contractionary
territory in September, while exports dropped by a
sharper-than-expected 10 percent.
Europe opened with a thud too, with falls of 0.7-1.3 percent
for Britain's FTSE, Germany's DAX and France's
CAC pulling the pan-regional STOXX 600 down for
a third day running and the sixth day in the last seven.
"We have got a stronger dollar and that is the market now
pricing in the likelihood of a December U.S fed rate hike," said
Rabobank currency strategist Jane Foley.
"The other theme is the weakness of Chinese exports. That
does help turn the spotlight on the recent weakness of the yuan.
Then of course there is sterling."
Bets on a Federal Reserve move remained broadly unchanged
after minutes from the U.S. central bank's last meeting had
shown policymakers still grappling over timing, but on balance
inching closer to a hike.
The minutes said "it was noted that a reasonable argument
could be made either for an increase at this meeting or for
waiting for some additional information on the labor market and
It was just enough uncertainty to pull the dollar off a
2-1/2-month high versus the yen - it traded at 103.80 yen
- and push ten-year yields on U.S. government debt
down 5 basis points to 1.74 percent, a relatively large move out
of U.S. hours.
There was no such reprieve for Britain's pound as it fell to
$1.2150 and to 90.5 pence per euro, extending
a slump of 15 percent or more since the UK's June vote to leave
The impact of the plunge was starting to show beyond the
market too, as the UK's largest supermarket Tesco
started taking some of the products from one of its biggest
suppliers Unilever off its shelves after refusing to
accept a 10 percent price hike.
The spat sent both firms' shares down 2.3 percent.
"Clearly Unilever won't be the only company wanting to pass on a
10 percent or similar price increase due to the fall in the
pound," Rabobank's Foley added.
The euro dropped under $1.10 for the first time in
almost three months as the dollar pressure was compounded by a
Reuters report that the ECB was considering a number of changes
to its 1.5 trillion euro bond buying programme.
Sources at the central bank said options included
occasionally buying bonds with yields lower than its -0.4
deposit rate and occasionally deviating away from rules on which
countries' bonds it buys.
The poor batch of Chinese trade numbers sent the offshore
version of the country's yuan close to lows last reached
in a dramatic sell-off in January and to a six-year trough in
the tightly controlled onshore market.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 1 percent, touching its lowest since Sept.
19. Hong Kong stocks fell 1.2 percent and Japanese shares
were down 0.4 percent thanks to a stronger yen.
"The China data has exacerbated the broad cautious mood and
we should see more gains for the yen and other safe-haven
assets," said a currency trader at an Asian bank in Hong Kong.
The CBOE Volatility Index, the "fear gauge" of
near-term investor anxiety, held around 16, indicating broader
Within Asia, the Thai baht was also in focus after
falling to an eight-month low in the previous session on
concerns about the health of 88-year-old King Bhumibol
Adulyadej. The health of the world's longest reigning monarch
has "overall not yet stabilised", the palace said on Wednesday.
Oil prices struggled following a 1 percent drop overnight
after the Organization of Petroleum Exporting Countries reported
its output hit an eight-year high in September, offsetting
optimism over a pledge to restrict output.
U.S. West Texas Intermediate crude slipped 0.8
percent to trade at $49.78 a barrel.
Copper and other industrial metals were flushed
lower by the China jitters, while safe-haven gold
edged up to $1,257 an ounce following a 6 percent slump over the
last three weeks.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
($1 = 0.8928 euros)
(Reporting by Marc Jones; editing by John Stonestreet)