Volkswacht Bodensee - Markets on edge over China economy woes

London and Paris flatlined while Frankfurt dipped, as dealers shrugged off growing optimism that the United States is winning its battle against inflation and could avoid recession.

The dollar receded versus the euro and yen before key US data on industrial production and retail sales.

Oil prices rose as the weak greenback made the dollar-denominated commodity cheaper for buyers using stronger currencies.

Asia stocks had sunk Monday as Chinese second-quarter growth data fell short of forecasts and highlighted the tough job officials face in getting the country's post-Covid recovery back on track.

"Traders are concerned about economic numbers from China and... remain on the edge," noted Zaye Capital Markets analyst Naeem Aslam.

And while there is expectation that more stimulus measures are in the pipeline, other analysts warned that leaders were limited in how far they could go.

The figures came after last week's reports showing inflation had flatlined, suggesting China was on the brink of a period of painful deflation, while exports plunged for a second straight month.

Hong Kong led Asian losses on Tuesday, shedding more than two percent following a five-day rally, as it reopened a day after being shut because of a severe storm.

Shanghai, Sydney, Seoul, Singapore, Manila, Jakarta, Wellington and Taipei also dropped, though Tokyo, Mumbai and Bangkok edged higher.

The losses came despite a positive lead from Wall Street.

US Treasury Secretary Janet Yellen meanwhile warned about the effects of China's weakness on the global economy.

"Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States," she told Bloomberg Television.

Yellen did however express optimism about the US economy, which she described as being on a "good path".

"Growth has slowed, but our labour market continues to be quite strong. I don't expect a recession," she added.

Her comments come after last week's news that US inflation had come down quicker than expected in June, stoking hopes the Federal Reserve was close to the end of its interest rate hiking cycle.

Investors are also keeping watch this week on corporate earnings, with Bank of America, Tesla, Netflix and EasyJet among those reporting.

- Key figures around 1045 GMT -

London - FTSE 100: FLAT at 7,408.61 points

Paris - CAC 40: FLAT at 7,288.88

Frankfurt - DAX: DOWN 0.1 percent at 16,058.85

EURO STOXX 50: DOWN 0.1 percent at 4,354.27

Tokyo - Nikkei 225: UP 0.3 percent at 32,493.89 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 19,015.72 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,197.82 (close)

New York - Dow: UP 0.2 percent at 34,585.35 (close)

Euro/dollar: UP at $1.1242 from $1.1236 on Monday

Dollar/yen: DOWN at 138.29 yen from 138.71 yen

Pound/dollar: UP at $1.3093 from $1.3073

Euro/pound: DOWN at 85.85 pence from 85.94 pence

West Texas Intermediate: UP 0.5 percent at $74.51 per barrel

Brent North Sea crude: UP 0.4 percent at $78.81 per barrel

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J.Bergmann--BTB