German share price index DAX graph is pictured at the stock exchange in Frankfurt
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 16, 2023. Reuters

European shares slipped on Tuesday, taking a breather from their sharp rally since the start of this year, after China posted its weakest annual economic growth in nearly half a century, stoking investors' fears of an economic slowdown.

The pan-European STOXX 600 was down 0.3% by 0925 GMT, after hitting its highest level in nine months in the previous session.

Asian shares and U.S. futures dipped after China's economic growth in 2022 slumped as the fourth quarter was hit hard by strict COVID-19 curbs and a property market slump, raising pressure on policymakers to unveil more stimulus this year.

The prospects of imminent global recession also cast a long shadow over Davos that kicked off on Monday, with two-thirds of private and public sector chief economists surveyed by the World Economic Forum expecting a global recession this year.

Rate-sensitive tech stocks declined 0.8%, weighing on Europe's STOXX 600 in early trading.

The benchmark index still gained nearly 7% in an upbeat start to the year, spurred by hopes of a rebound in China's economy, easing of price pressures and growing expectations of a milder-than-expected recession.

"The combination of falling gas prices removing the risk of recession being as deep as feared is helping some of the beaten-up stocks, which had already priced in a pretty deep recession," said Mike Bell, global market strategist at J.P. Morgan Asset Management.

Data on Tuesday showed German inflation eased further in the final month of 2022, confirming preliminary data.

However, Germany' BDI industry association warned that the economy is expected to contract by 0.3% this year as energy crisis would continue to weigh on the industry in Europe's largest economy.

China-exposed LVMH slipped 0.4% after briefly hitting a record high that pushed the luxury goods group's market cap above 400 billion euros ($432.64 billion) for the first time.

"Luxury stocks as a group are generally pretty heavily exposed to China and China's consumer spending," said Bell.

"So the reopening story in China and that accumulated savings are probably quite a large part of that."

UK's blue-chip FTSE 100 dipped 0.2%, but was still within a hair's breadth of hitting a record high of 7,903.50.

Shares of Ocado Group fell 6.6% after its online joint venture Ocado Retail said its customers purchased fewer items per order in the run-up to Christmas in response to the cost-of-living crisis.

THG slid 5.1% after the online retail platform warned on profit as its revenue growth missed its target.

Shares of Hays Plc gained 2.2% after the British recruitment agency reported a rise in its second-quarter net fees.

Investors also looked forward to U.S. earnings with Goldman Sachs and Morgan Stanley expected to report later in the day.

($1 = 0.9246 euros)