China stocks snap week-long rally as factory deflation deepens

SSEC -0.1%, CSI300 -0.3%

China Aug factory deflation deepens, prices fall most in 3 yrs

U.S. Treasury secretary rules out threat of recession

SHANGHAI, Sept 10 (Reuters) - China stocks slipped on Tuesday, snapping a week-long winning streak, after data showed the country's factory deflation deepened in August amid a protracted trade dispute with the United States.

** The blue-chip CSI300 index .CSI300 fell 0.3%, to 3,959.27, while the Shanghai Composite Index .SSEC shed 0.1% to 3,021.20.

** China's factory-gate prices shrank at the quickest pace in three years in August, falling deeper into deflationary territory and reinforcing the urgency for Beijing to step up economic stimulus as the trade war with the United States intensifies.

** Analysts say flagging demand at home and abroad is forcing some Chinese businesses to slash prices to win new orders or cut output to contain costs, chipping away at already-lean profits and further dampening business confidence.

** Meanwhile, doubts remained as to if China and the United States could make any material progress in their trade talks early next month, as investors tried to find clues from latest trade comments from both sides.

** U.S. Treasury Secretary Steven Mnuchin on Monday said he did not see the threat of a recession as the Trump administration seeks to revive trade negotiations with China, adding that he expected a positive year ahead for the U.S. economy.

** Many Chinese analysts believe the A-share market has become less sensitive to changes in the Sino-U.S. trade situation, and expect limited fallout whether or not the two sides make any progress this time.

** Tuesday's weakness could also be partly due to profit-taking following recent gains. The benchmark Shanghai index reached the key 3,000 level, seen as a strong resistance since May when markets tumbled after U.S. President Donald Trump threatened fresh tariffs.

** Around the region, MSCI's Asia ex-Japan stock index .MIAPJ0000PUS was weaker by 0.13%, while Japan's Nikkei index .N225 closed up 0.35%.

** At 07:14 GMT, the yuan CNY=CFXS was quoted at 7.1039 per U.S. dollar, 0.24% firmer than the previous close of 7.121.

** The largest percentage gainers in the main Shanghai Composite index were Harbin High-Tech Group Co Ltd 600095.SS, up 10.02%, followed by China Wafer Level CSP Co Ltd 603005.SS, gaining 10.02%, and Kingfa Sci&Tech Co Ltd 600143.SS, up by 10.01%.

** The largest percentage losers in the Shanghai index were China National Software & Service Co Ltd 600536.SS, down 8.5%, followed by Guangdong Ellington Electronics Technology Co Ltd 603328.SS, losing 6.42%, and Zhengjiang Huazheng New Material Co Ltd 603186.SS, down by 5.84%.

** As of 07:15 GMT, China's A-shares were trading at a premium of 30.14% over the Hong Kong-listed H-shares.

(Reporting by Luoyan Liu and John Ruwitch; Editing by Subhranshu Sahu)

((luoyan.liu@thomsonreuters.com; Reuters Messaging: luoyan.liu.thomsonreuters.com@reuters.net))

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