GLOBAL MARKETS-Weak China trade hits stocks, prompts risk-off trade

NEW YORK (Reuters) – World stock indexes fell on Monday after a shock contraction in Chinese trade reignited fears of a sharper slowdown in global growth and caused investors to sell riskier assets.

Copper and other commodity prices fell and the Australian and New Zealand dollars also declined following the China news, which added to worries that U.S. tariffs on Chinese goods were taking a toll on the world’s second-largest economy. The yen rose against the dollar.

“The biggest theme (in the market today) is risk-off,” said John Doyle, vice president of dealing and trading at Tempus, Inc.

Data from China showed imports fell 7.6 percent year-on-year in December while analysts had predicted a 5-percent rise. Exports dropped 4.4 percent, confounding expectations for a 3-percent gain.

(GRAPHIC: China trade shock – tmsnrt.rs/2SYCUu9)

For an interactive version of the following chart, click here tmsnrt.rs/2SRopIf.

The United States and China – the world’s two largest economies – have been in talks for months to try to resolve their bitter trade war, with no signs of substantial progress.

Adding to the gloom were weak industrial output numbers from the euro zone, which showed the largest fall in nearly three years.

Softening demand has been felt around the world with sales of goods ranging from iPhones to automobiles slowing, prompting profit warnings from Apple (AAPL.O) among others.

Trade-sensitive shares fell, including Boeing Co (BA.N) Caterpillar Inc (CAT.N), though U.S. stock investors also were on edge as the U.S. earnings season kicked off.

“We’re seeing some cautiousness heading into the beginning of earnings season as people are worried about guidance and what companies are going to say, especially in relation to trade,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

The Dow Jones Industrial Average .DJI

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