China shares rise as slowing factory deflation boosts recovery hopes

* Shanghai Composite Index +0.75%, CSI300 +0.57%

* China factory deflation eased in July, adds to recovery hopes

* Sino-U.S. tensions continue to drag on sentiment

SHANGHAI, Aug 10 (Reuters) - China shares ended higher on Monday, turning around from early losses as data signalling slow factory deflation reinforced hopes of an economic recovery from the pandemic-driven lockdown.

** At the close, the Shanghai Composite index was up 0.75% at 3,379.25, after earlier falling as much as 0.57%. ** The blue-chip CSI300 index was up 0.36%, clawing back from a 1.31% fall. ** The CSI financial sector sub-index ended 1.34% higher, the consumer staples sector added 0.11%, the real estate index jumped 3.08% and the healthcare sub-index closed 0.62% lower. ** The broader market gains came after data showed that China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of economic recovery. ** But Sino-U.S. tensions are expected to continue to weigh on sentiment after Beijing’s top representative office in Hong Kong denounced sanctions imposed by Washington on senior Hong Kong and Chinese officials. ** The sanctions came ahead of a Taiwan visit on Monday by U.S. Health Secretary Alex Azar, the highest-level U.S. official to visit the island in four decades. China has condemned the trip and promised retaliation. ** The smaller Shenzhen index ended up 0.21% and the start-up board ChiNext Composite index was weaker by 0.534%. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.12%, while Japan’s Nikkei index closed down 0.39%. ** At 0701 GMT, the yuan was quoted at 6.9674 per U.S. dollar, 0.01% weaker than the previous close of 6.967. ** So far this year, the Shanghai stock index gained 10.8% and the CSI300 has risen 15.3%, while China’s H-share index listed in Hong Kong dropped 10.4%. Shanghai stocks rose 2.09% so far this month. (Reporting by Andrew Galbraith, Editing by Sherry Jacob-Phillips)