European and US stock markets recovered slightly yesterday, despite Beijing ratcheting up its rhetoric against Washington as the US-China trade war rattles on.

“European stocks have surprisingly managed to shake off a weak close on Wall Street Wednesday where indices dropped to their lowest level in ten weeks on a heady mixture of trade war worries and growing concerns over the state of the US economy,” said Fiona Cincotta, analyst at City Index trading group.

The dollar rose against the euro, with the European single currency continuing to take a knock from increasing concerns over Italy's debt mountain.

Meanwhile, Wall Street opened higher as the downward revision of US GDP growth in the first quarter from 3.2 to 3.1 per cent was better than expected.

Briefing.com analyst Patrick O'Hare said that nothing had improved on the trade deal front to foster a positive bias.

“The improved tone, then, is being driven predominately by a sense that the stock market seems primed to bounce from a short-term oversold condition,” he said.

Global stock markets had largely slumped on Wednesday on the latest salvos in the US-China trade war.

With no date set for talks to resume, and Beijing accusing Washington of “naked economic terrorism” yesterday in its handling of the dispute, investors appeared resigned to the prospect of the dispute extending into the coming months.

“We are against the trade war, but we are not afraid of it,” Chinese vice foreign minister Zhang Hanhui told a press briefing.

“This premeditated instigation of a trade conflict is naked economic terrorism, economic chauvinism, and economic bullying,” Zhang added.

A veiled threat by Beijing on Wednesday to cut critical exports of rare earth minerals to the United States intensified concerns.

It was the latest salvo in a months-long row that has seen Washington and Beijing slap tit-for-tat tariffs on imports, with US President Donald Trump upping the ante in recent weeks by blacklisting Chinese telecom giant Huawei.

Any move by China, which produces 95 per cent of the world's rare earths, to restrict exports to the US would have a devastating impact on manufacturers of everything from smartphones to computers to lightbulbs.

In Asian stocks trading yesterday, Tokyo and Shanghai ended 0.3 per cent lower while Hong Kong dropped 0.4 per cent.

In bond markets, a push towards haven purchases has seen the yield, or rate of return, on 10-year US Treasury notes plummet to the lowest level since September 2017.

Investors were also worried about short-term yields rising above those for 10-year debt, which is seen as a sign of an impending recession.

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