European stock markets lost ground again Thursday as investors all but gave up hope that a US-China trade war could be nearing its end, while US equities nervously traded sideways.
Fears over the stand-off between the world's two biggest economies added to jitters over the state of the world economy which had inflicted heavy losses on equities Wednesday, including the worst one-day fall this year on Wall Street's Dow.
"Every time investors find the strength to pick themselves up off the floor, the trade war delivers another blow and knocks them down again," said Craig Erlam at Oanda.
"This morning that came in the form of reports that China is threatening retaliation against Trump's tariffs that are due to come into force on 1 September."
- 'Huge shake down' -
The yield on the 10-year US Treasury bond slid Wednesday below the yield on the two-year note, an "inversion" that has been a reliable harbinger of recession for decades.
"The slew of negative news has seen a huge shake down in global equity markets, and money has poured into government bonds," noted David Madden, analyst at CMC Markets UK.
European stocks gave up an early attempt at a rebound to trade lower across the board, with London the worst performer, weighed down by a strengthening pound.
US stocks saw some nervous swings during the morning session in New York.
They managed to claw back a tiny part of Wednesday's heavy losses at the opening bell, then slipped into negative territory, before trading a touch higher again by the late New York morning.
"US stocks are nudging higher in the wake of yesterday's plunge that came courtesy of heightened global recession concerns," said Charles Schwab analysts.
The DJIA index had slumped around 800 points, or 3.1 percent, the previous day.
- 'More sinister' -
The trade war has hammered global demand, with data this week showing China's industrial output had struck a 17-year low, while investment and retail sales have also slowed in the world's second biggest economy.
"US-China trade tensions have metastasised into something more sinister by affecting global growth to such a large degree that bond markets are pricing-in a high probability of a worldwide recession," warned Stephen Innes, managing partner at VM Markets.
Weeks of pro-democracy protests in Hong Kong have added to the uncertainty, with Beijing referring to increasingly violent demonstrations as "terrorism", stoking fears of a Chinese crackdown.
Economists have warned for months that trade tensions threatened investment and dampened global sentiment, which was already suffering owing to China's economic slowdown and fears over Brexit's impact on Britain and Europe, where the German economy is showing signs of contraction.
The pound climbed against the dollar and euro as data showed British retail sales rose unexpectedly by 0.2 percent in July.
"The UK's retail data surprised the investors by posting an upbeat reading and traders pushed the (pound) currency higher," said Naeem Aslam, chief market analyst at Think Markets.
He warned however that "there is no light at the end of the Brexit tunnel" so far.
- Key figures around 1540 GMT -
London - FTSE 100: DOWN 1.1 percent at 7,067.01 points (close)
Frankfurt - DAX 30: DOWN 0.7 percent at 11,412.67 (close)
Paris - CAC 40: DOWN 0.3 percent at 5,236.93 (close)
EURO STOXX 50: DOWN 0.2 percent at 3,282.78
New York - Dow: UP 0.1 percent at 25,515.07
Tokyo - Nikkei 225: DOWN 1.2 percent at 20,405.65 (close)
Hong Kong - Hang Seng: UP 0.8 percent at 25,495.46 (close)
Shanghai - Composite: UP 0.3 percent at 2,815.80 (close)
Euro/dollar: DOWN at $1.1105 from $1.1138 at 2100 GMT
Pound/dollar: UP at $1.2120 from $1.2056
Euro/pound: DOWN at 91.62 pence from 92.38 pence
Dollar/yen: UP at 106.14 yen from 105.78 yen
Brent North Sea crude: DOWN 2.3 percent at $58.09 per barrel
West Texas Intermediate: DOWN 1.3 percent at $54.52 per barrel