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Global shares slip on China slowdown fears

European shares have paused their new year rally and Asian equities slipped after China reported weak fourth-quarter economic data on Tuesday, keeping investors on edge over the prospects of a global recession.

The Euro STOXX 600 lost 0.2 per cent on Tuesday, slipping from its nine-month high hit on Monday. Global equities have enjoyed a rally in 2023, spurred by hopes of a rebound in China's economy and an easing of prices pressures in the United States and Europe.

But the Chinese data showed that the world's second-biggest economy grew 2.9 per cent in the fourth quarter of last year, beating expectations but underscoring the toll exacted by Beijing's stringent "zero-COVID" policy.

China's growth for 2022 of three per cent was far below the official target of about 5.5 per cent. Excluding a 2.2 per cent expansion after COVID-19 first hit in 2020, it was the worst showing in nearly half a century.

Asia-Pacific shares outside Japan widened losses in response, and were last down 0.4 per cent. Shares in Hong Kong's dropped 0.8 per cent and China's benchmark CSI300 Index clawed back losses to close flat.

In Europe, China-exposed financials HSBC and Prudential fell one per cent and 0.4 per cent respectively. Economy-sensitive consumer staples such as Unilever and Danone also fell more than one per cent each.

Market players said investors were taking stock of how economies would expand as inflation peaked and central bank tightening of monetary policy slowed, with the China data underscoring doubts over whether it could act as a spur.

"What will be the thing that reinvigorates growth?" said Gael Combes, head of fundamental research at Unigestion. "China is probably unlikely to provide the lift is has provided in the past, like during the global financial crisis."

Wall Street was set to open slightly lower after a public holiday on Monday, with E-mini futures for the S&P 500 down 0.3 per cent.

The dollar index bounced from a seven-month low of 101.77 made a day ago, holding at 102.30, while the Japanese yen stayed close to seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan (BOJ).

The yen steadied around 128.51 on Tuesday after hitting a top of 127.22 per dollar on Monday, with traders braced for sharp moves when the BOJ concludes a two-day meeting on Wednesday.

The bank is under pressure to change its interest rate policy after its attempt to buy itself breathing room backfired, emboldening bond investors to test its resolve.

Euro zone bond yields inched up from month lows hit late last week, but trading in bonds globally was cautious ahead of the result of the BOJ meeting.

Across the world, the R-word continues to loom large.

Two-thirds of private and public sector chief economists surveyed by the World Economic Forum in Davos expected a global recession this year, with some 18 per cent considering it "extremely likely" - more than twice as many as in the previous survey conducted in September 2022.

Spot gold was down 0.5 per cent at $US1909.23 per ounce.