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The U.S. dollar recovered from early weakness but a gauge of world equity performance edged lower on Thursday as concerns about global growth offset investor optimism over a surge in U.S. retail sales last month and strong Walmart earnings.

Gold prices, which have climbed almost 20 per cent since late May on uncertainty driven by the U.S.-Sino trade spat and global growth concerns, edged higher amid concerns about a slowdown after China threatened to retaliate against the latest U.S. tariffs.

China called on the United States to meet it halfway on a potential trade deal as U.S. President Donald Trump said any pact would have to be on America’s terms.

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The yield on 30-year U.S. government debt fell to a record low below 2 per cent and benchmark 10-year Treasury notes dropped to a three-year trough, beaten down by the U.S.-Chinese trade tensions and economic growth concerns.

Euro zone government bond yields went further into negative territory, reflecting concerns of an impending global recession after the U.S. yield curve remained inverted for a second day in a row. The inversion is a classic sign of recession.

But Walmart Inc. reported strong second-quarter results and raised its earnings expectations for the year, while U.S. retail sales increased 0.7 per cent last month after gaining 0.3 per cent in June, the Commerce Department said.

Economists polled by Reuters had forecast retail sales would rise 0.3 per cent in July.

Investors are caught between slowing global growth, which is weighing on equity markets, with few alternatives to invest in when the dividends of many stocks are higher than the interest on government debt, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“When you get a story like Walmart, you see the glass is half full because maybe it’s not as bad as it seems. There are still companies succeeding in this environment, and that’s going to cause the market to go back and forth,” Meckler said.

Canada’s main stock index hit a five-month low on Thursday, as the inversion of the country’s yield curve by the most in nearly two decades raised fears of a looming recession, adding to worries over slowing global growth.

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The Toronto Stock Exchange’s S&P/TSX composite index closed unofficially down 33.41 points, or 0.21 per cent, at 16,012.53

Inversion of Canada’s yield curve by the most in nearly two decades is threatening to coerce the Bank of Canada to cut interest rates rather than risk an economic downturn, portfolio managers said.

The energy sector dropped 0.8 per cent as crude prices slid, while the heavyweight financials sector and the industrials sector fell 0.4 and 0.6 per cent, respectively.

Health care stocks dropped 6.2 per cent as Canopy Growth Corp. fell 14.5 per cent. Cronos Group Inc. and Aphria Inc. lost 8.9 per cent and 7.6 per cent, respectively.

MSCI’s gauge of stocks across the globe shed 0.29 per cent, while the pan-European STOXX 600 index lost 0.18 per cent.

Stocks on Wall Street trended lower after earlier gains.

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The Dow Jones Industrial Average rose 99.56 points, or 0.39 per cent, to 25,578.39, the S&P 500 gained 6.99 points, or 0.25 per cent, to 2,847.59 and the Nasdaq Composite dropped 7.32 points, or 0.09 per cent, to 7,776.62.

The U.S. dollar recovered from early weakness against the safe-haven yen on the better-than-expected U.S. retail sales. The yen tends to benefit from geopolitical or financial stress as Japan is the world’s biggest creditor nation.

The Japanese yen weakened 0.22 per cent versus the greenback at 106.16 per dollar. The dollar index rose 0.2 per cent, with the euro down 0.34 per cent to $1.11.

Oil prices fell more than 1 per cent on Thursday, extending the previous session’s 3 per cent drop, pressured by mounting recession concerns and China’s threat to impose counter-measures in retaliation for the latest U.S. tariffs on $300 billion of Chinese goods.

In a sign of investor concern that the world’s biggest economy could be heading for recession, the U.S. Treasury bond yield curve inverted on Wednesday for the first time since 2007.

China’s on Thursday vowed to counter the latest U.S. tariffs, but called on the United States to meet it halfway on a potential trade deal, as U.S. President Donald Trump said any pact would have to be on America’s terms.

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A trade war between to the world’s two largest economies has roiled global markets and fueled worries about a slowdown in oil demand growth.

Brent crude fell as much as $1.81, or 3 per cent, to $57.67 a barrel. The global benchmark ended the session down $1.25, or 2.1 per cent, at $58.23 and West Texas Intermediate crude (WTI) settled down 76 cents, or 1.4 per cent, to $54.47.

“Oil is getting whacked again as risk-aversion again kicks in and fears of a trade war inflicted slowdown grip traders,” said Craig Erlam, senior market analyst at OANDA.

“WTI had enjoyed a decent rebound over the last week but failed at the first hurdle, running into resistance around the mid-July lows before plunging once again.”

Reuters

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