Weak China data weighs on global stocks, euro

Poor Chinese trade data clipped a hot streak for European shares and the euro on Friday, trimming gains built since the European Central Bank started readying a new plan to combat the region's debt woes and limp growth.

Europe's stock markets began their most recent rally two weeks ago when ECB President Mario Draghi said the central bank was "ready to do whatever it takes to preserve the euro", raising hopes of heavy bond buying to aid Spain and Italy.

A big undershoot in China's July exports on Friday, however, soured the mood.

The FTSEurofirst 300 index of top European shares was down 0.45 percent at 1,096 points at 1130 GMT, the first drop in five days and one that looked set to spread across the Atlantic in early U.S. trading, with S&P 500 futures down 0.4 percent.

The drop in shares was complemented by greater demand for German government bonds - traditionally favoured by risk-averse investors. Bund futures were up 78 ticks at 143.34 from Thursday's settlement.

"There has been quite a healthy run-up after the ECB meeting last week - the Euro Stoxx 50 has risen around 8 percent in the last three sessions, and so it is natural to see a bit of a correction," said Adrian Foster at Rabobank.

"It is the ... weaker (Chinese) exports and bank lending that has pushed the market down."

"There was a hope that the stimulus that has been put in place would start to drive things in the third quarter, but there is nothing in these data that suggests the (Chinese) economy is really picking up," he added.

There was little new data of substance in Europe for financial markets to get their teeth into following the disappointing Chinese numbers. Along with anaemic export figures, the country's banks had lent far less than expected in July.

The U.S. calendar for Friday is also light, with import and export prices and Federal budget figures the most significant on offer.

Early disappointment came from retail bellwether J.C.Penney , whose shares dropped 9.9 percent in premarket trading after it reported a deeper-than-expected drop in same-store sales.

ECB THE KEY

Limbo in the euro zone is also keeping markets in check.

Next week, second-quarter gross domestic product data is expected to show the euro zone economy contracted.

Hopes are high that the ECB will step in with bond purchases to ease borrowing costs for Spain and Italy, but until details emerge - including the strings attached to any support - investors will be wary.

The euro, the key barometer of faith in the euro zone's ability to overcome its debt problems, was down at $1.226, 1.4 percent off its peak of the week.

"The euro is working its way through another small corrective phase within a massive, long-term downshift," said Richard Hastings, macro strategist at Global Hunter Securities.

The oil markets were lower after the International Energy Agency cut its demand forecasts for next year and said crude stocks were rising.

Brent crude fell to around $111.56 a barrel, down $1.66 by 1250 GMT, while U.S. crude was down $1.44 at $91.92.

"Lower economic growth is feeding through to slower oil demand all round," said David Fyfe, head of the IEA's markets division. "Global inventories have risen, and the oil market looks comfortably supplied."

Gold also inched down to $1,608.82 an ounce, but remained on track for a second weekly gain in three weeks, bolstered by hopes China could move again to stimulate growth.

(Editing by Will Waterman)