ORLANDO, Florida, Nov 17 (Reuters) - Worries over the

health of the U.S. consumer helped push Wall Street deep into

the red on Monday, as investors also braced for Nvidia's

earnings and the resumption of key U.S. economic data releases

later in the week.

More on that below. In my column today I look at how the

deflationary pressures that have clouded China's economy for

years could have global ripples. If so, it will provide some

crumbs of comfort for policymakers in Washington.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Retail investors show less conviction in buying

U.S.

stock market dips

2. Trump cuts tariffs on beef, coffee and other

foods as

inflation concerns mount

3. Japan's economy contracts for first time in six

quarters

on tariff hit

4. China and Germany agree to work on closer

commercial

ties, end trade tensions

5. Tech blues, shifting Fed/ECB sands and euro

haven?: Mike

Dolan

Today's Key Market Moves

* STOCKS: Wall Street indices down between 0.9% and

2%,

small caps underperform; Europe also down across the board, Asia

mostly lower but South Korea +2%, India up for sixth day.

* SHARES/SECTORS: U.S. energy and financials slide

2%,

tech and materials -1.5%. Comms services and utilities the only

gainers. Alphabet +3% to new record, Dell -8%, Super Micro

Computer -7%.

* FX: Dollar rises broadly, USD/JPY back above

155.00,

Bitcoin hits seven-month low below $92,000.

* BONDS: U.S. yields down 1-2 bps across the curve.

UK

gilt yields fall further, retracing some of Friday's surge.

* COMMODITIES/METALS: Oil down around 0.3%, gold

-1.4%.

Today's Talking Points

* Volatility makes belated return

The VIX "fear index" of implied volatility on the S&P

500 posted its highest close in a month on Monday, and

third-highest since May. One-month implied vol in euro/dollar,

the world's most traded currency pair, also rose to its highest

level in a month.

A sense of unease is rippling across markets, and with hopes

of another Fed rate cut in December fading, now seems as good a

time as any for investors to take profit on highly profitable

trades this year - long stocks, short dollars among them.

* Crypto crumble?

On a related note, such is the volatile nature of

cryptocurrencies, a near-30% fall in bitcoin in just six weeks

may not be all that remarkable. After all, bitcoin had a similar

slump earlier this year before powering to new highs in the

"everything rally" from the post-Liberation Day low in April.

But the current slide into a bear market is notable. If you

think bitcoin is a reasonable proxy for wider market sentiment,

risk appetite and speculative activity, investors are drawing in

their horns ahead of year-end. The next few weeks could be

bumpy.

* GDP slump fuels Japan stimulus debate

Figures on Monday showed that Japan's economy shrank in the

three months to September, its first decline in six quarters.

The good news, however, was the 1.8% contraction was not as deep

as the 2.5% fall economists had expected.

The data will stoke the already-crackling debate around

economic stimulus. One government official is now calling for a

fiscal package worth nearly $150 billion, and Bank of Japan

governor Kazuo Ueda is warning against keeping monetary policy

too loose. All the while, the yen is back below 155 per dollar

into potential intervention territory.

China could give the U.S. a disinflationary hand

As policymakers in the United States fret about getting

inflation back down to target, they may inadvertently get a

helping hand from an unlikely source.

The U.S.'s main economic rival China is struggling to slay

the specter of deflation. It's a domestic battle officials in

Beijing are nowhere near winning, despite some glimmers of hope

in recent official data.

China's annual consumer inflation was marginally positive in

October, but producer prices fell year on year for the 37th

consecutive month.

What's more, fixed asset investment last month plunged 1.8%

- excluding the pandemic shutdown, the biggest fall since

comparable records began 30 years ago - and the 10-year bond

yield is stuck at a lowly 1.8%. Neither points to an economy on

the verge of a reflationary expansion.

Domestic disinflation has been a feature of the world's

second-largest economy for the better part of three years. These

pressures have become entrenched, most notably in housing. But

many other industries, including autos and green technologies,

have also been blighted by overcapacity, intense competition

and margin-wrecking price cuts.

So much so, Beijing has responded with an "anti-involution"

campaign to get companies and local authorities to stop the rot,

reverse course, and generate sustainable inflation.

But there are doubts around Beijing's commitment to this.

Many economists say the steer from the ruling Communist Party's

five-year planning meeting, or "plenum", last month shows that

authorities continue to prioritize preserving manufacturing

strength over boosting domestic consumption.

With domestic demand still so sluggish, Chinese firms are

responding with a familiar tactic: selling abroad, even if it

means cutting prices to maintain market share. Exports are

soaring, and China is flooding some of its key trading partners

with cheap goods.

Brad Setser, senior fellow at the Council on Foreign

Relations in Washington, says China's surplus in manufactured

goods easily exceeds $2 trillion. That's around 10.5% of the

country's GDP, and more than 2% of world GDP, "a surplus that

far exceeds the combined surpluses of Germany and Japan at their

peaks."

Importantly, China is increasingly exporting to other Asian

markets. Torsten Slok, chief economist at Apollo Global

Management, says Chinese exports to Asia this year are up $150

billion, double the $75 billion drop off in exports to the U.S.

So, despite the ongoing trade war, the world is still awash

with Chinese goods.

CHINA'S NEW EXPORT BOOM

But this surge is different from China's previous export

boom.

Back in the early 2000s, China was the factory to the world,

flooding the global economy with cheap goods from T-shirts to

TVs. The deflationary supply shock was strong, and consumers in

the U.S., Europe and other large markets took full advantage.

Today, China is much further up the production value chain,

and its competitors are no longer low-cost emerging economies,

but advanced manufacturing nations like Japan and Germany.

China now makes and sells autos, electric vehicles, solar

panels and other high-quality goods. As CFR's Setser notes,

China currently exports well over 6 million cars, about a tenth

of the global auto market outside of China, and these exports

are expected to reach 8 million next year. No wonder Germany and

Japan are nervous.

"China is doubling down on its export led growth model. The

difference is now we're talking about more capital and

intermediary goods," says Innes McFee, chief global economist at

Oxford Economics.

DISINFLATION NATION

Will this new supply shock from China be enough to help cap

or even push down global prices? Perhaps.

McFee's colleagues at Oxford Economics estimate that a broad

10% fall in Chinese export prices would push down producer

prices in the U.S. by 0.1-0.2%, and by around 0.6% in Southeast

Asia. Chinese domestic industry disinflation of 10% would

increase those hits to 0.3% and 1.6%, respectively, they

estimate.

That's a meaningful impact.

China's latest domestic signals suggest disinflation in the

country could be a force for some time.

While this weak price environment may continue to worry

policymakers in Beijing, it could, at the margins, offer some

comfort to those in Washington.

What could move markets tomorrow?

* Australia RBA minutes

* U.S. durable goods (August)

* U.S. TICS capital flows (September)

* U.S. Federal Reserve officials scheduled to speak include

Dallas

Fed's Lorie Logan, Richmond Fed's Thomas Barkin, and Governor

Michael Barr

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