United States stocks steady after plunge, but caution still reigns

Donald Trump

Worries about a possible recession collided with hopes that the strongest part of the US economy - shoppers spending at stores and online - can keep going.

While all three major USA stock averages were sharply higher, they are still on track to post their third straight weekly declines, having been battered since Monday by accelerating U.S. Hopes of a swift resolution between the US and China have been dashed and investors appear to be digging in for a protracted dispute.

While all three major US stock averages ended Friday's session higher, they still logged their third consecutive weekly losses, having been rattled since Monday by growing US-China trade animosity, simmering geopolitical tensions and signals from the bond market that sparked fears of impending recession.

Even before Trump gave retailers an early Christmas bonus by delaying tariffs on more than half the $300 billion in Chinese goods targeted for new 10 percent punitive duties, Americans' spending habits were buoying the economy.

All three major USA stock indexes fell Wednesday upon rising concerns of an approaching recession, signaled in part by the benchmark 30-year Treasury bond falling to a record low.

The S&P 500 was up 0.2%, as of 3:25 p.m. A day earlier, it plunged 2.9%. The Shanghai Composite gained 0.7% to 2,834.85.

Trump has spent much of the week at his New Jersey golf club, many of his mornings on the links, his afternoons watching cable television and his evenings calling confidants and business executives to get their take on the market's volatility.

President Donald Trump on Thursday defended his handling of the USA economy and trade war with China as recession fears have suddenly cast doubt on his central claim for re-election - that he has made the economy great again. -China trade war intensifies. The yield rose to 1.52% by late afternoon, which appeared to put some investors in a buying mood. Trump's 2017 tax cut proved so politically unpopular that many Republicans ran away from it during last year's midterms. The previous low was 2.09 percent three years ago, after Britain voted to leave the European Union. It also recovered some of its decline and stood at 1.98% Thursday afternoon. When investors worry about weaker economic growth and inflation, they tend to pile into Treasurys, which pushes up their prices and in turn pushes down yields.

"I wouldn't forecast a recession just on the yield curve", said Eric Winograd, senior economist at AllianceBernstein.

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Companies' reluctance to invest amid the uncertainty of the trade war, has already slowed growth.

After the markets closed Wednesday, Bank of America had fallen more than 4 percent, Citigroup 5.28 percent and JPMorgan 4.14 percent. The S&P 500, though, remains within 6 percent of its record set late last month.

"Every economic number that comes out globally will be seen through the lens of how much trade tensions will negatively impact growth and subsequently markets", said Massud Ghaussy, senior analyst, Nasdaq IR Intelligence in NY.

General Electric sank 9.5% on news that the industrial conglomerate is being accused of hiding its financial problems by Harry Markopolos, the prominent whistleblower known for outing Bernie Madoff.

With all other sectors also in the black, the pan-European stocks benchmark rose 1.2 per cent, adding to morning gains when stimulus hopes from Beijing had supported risk appetite.

The Stoxx Europe 600 slipped 0.5% and the German DAX fell 0.7%, a day after Germany reported a contraction in the second quarter. The 10-year yield fell below 1.6 percent.

Japan's Nikkei 225 fell 1.2%, and the Hang Seng in Hong Kong rose 0.8%.

The outlook for Germany's export reliant economy was also grim and Chinese industrial output growth cooled to a more than 17-year low, adding to headwinds for U.S. multinationals that rely on global demand.

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