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* World shares slip after seven days of gains
Trump holding up China deal, talks down Fed rates and dollar
* Chinese inflation subdued ex-food, U.S. CPI due next
* Hong Kong markets, exposed shares hit by local unrest
* Oil prices fall 2% on demand concerns
By Marc Jones
LONDON, June 12 (Reuters) - World share markets snapped a seven-day winning streak on Wednesday as the White House took a tough line on trade talks with China, while an impending reading on U.S. inflation was set to refine the odds of an early cut in interest rates there.
Europe's main markets and Wall Street futures both followed Asia lower. London's FTSE, the DAX in Frankfurt and CAC40 in Paris fell 0.4% to 0.6% as traders trimmed June's near 4% gains.
Benchmark government bonds rallied as the caution returned. FX dealers kept the dollar near an 11-week low as they waited to see whether the U.S. inflation numbers would bolster their bets on the first U.S. rate cuts since the financial crisis.
"I think we are in for a very nervous wait until next week's FOMC meeting," Saxo Bank's head of FX strategy, John Hardy, said.
"You have had the markets taking out aggressive positions on where the Fed is going to go and everybody is wondering whether they are ready to deliver as much, in terms of guidance, as has been priced in."
Chinese inflation was in the mix, too. Figures overnight showed it picked up to a 15-month high of 2.7%, mainly because of surging pork prices. Excluding food, inflation rose only 1.6% and suggested plenty of scope for more stimulus.
MSCI's broadest index of Asia-Pacific shares outside Japan had slipped 0.6% after two days of gains and after Wall Street's recent rally had stalled on Tuesday.
Japan's Nikkei dipped 0.3% and Shanghai blue chips fell 0.7% following a 3% jump the day before.
Hong Kong's Hang Seng lost 1.7% as demonstrators stormed roads next to government offices to protest against a bill that would allow people to be sent to China for trial.
"The impact was short-lived in the past," noted Alex Wong, director at Ample Finance Group in Hong Kong. "This time people will look at how the U.S. reacts to this kind of news. The U.S. attitude towards Hong Kong and China are also not the same."
President Donald Trump said on Tuesday he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees to four or five "major points", which he did not specify. He said interest rates were "way too high" and the Federal Reserve had "no clue".
Fed policymakers will meet on June 18-19. With trade tensions rising, U.S. growth slowing and hiring in May declining, markets have priced in at least two rate cuts by the end of 2019. Futures imply around an 80% chance of a rate cut as early as July.
That might change depending on what U.S. consumer price data show later in the session. Headline inflation is expected to slow to 1.9%, with the core rate steady at 2.1%.
Trump also alarmed currency markets by tweeting that the euro and other currencies were "devalued" against the dollar, putting the United States at a "big disadvantage".
The euro gained to $1.1336, just short of the recent three-month high of $1.1347. The dollar fell against the yen to 108.25 and stalled on a basket of currencies at 96.608 .
"The President's tweets on the USD have the potential to have much more lasting impact in the coming election year," said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank. "Global conditions are nicely set for what has colourfully been described as a 'currency war' or a currency race to 'the bottom'."
The Turkish lira weakened before a central bank meeting that's expected to leave Turkey's main interest rate unchanged at 24%. In commodity markets, all the chatter of rate cuts kept gold near 14-month highs at $1,335.51 per ounce.
Oil prices dropped over 2% as concern about a global economic slowdown offset expectations that OPEC and its allies will extend their supply curbs.
Hedge fund managers have been liquidating bullish oil positions at the fastest rate since late 2018 amid growing economic fears.
Brent crude futures fell $1.4 cents to $60.87, while U.S. crude lost $1.2 to $52.10 a barrel.
(Additional reporting by Wayne Cole in Sydney, editing by Larry King)