* European stocks follow Asian markets higher
* Chinese imports fall but by less than expected
* Govt bond yields rise after blistering rally
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Aug 8 (Reuters) - Stock markets enjoyed a tentative
recovery on Thursday after better-than-expected Chinese export
data, while a steadying of the yuan restored some calm to global
markets following a stormy few days that sent investors
scrambling for safety.
Investors were encouraged by data showing Chinese exports
rose 3.3% in July from a year earlier, beating an expected
decline of 2%. Chinese imports fell by less than forecast,
despite the Sino-U.S. tariff struggle. Markets went into a tailspin on Monday after China let its
currency weaken beyond 7 yuan per dollar, a surprise move that
investors took as retaliation for U.S. President Donald Trump's
announcement of more tariffs on Chinese imports.
Investors fear the trade conflict between the world's two
biggest economies will cause a global recession. Bond markets
have flashed red and a closely watched U.S. recession indicator
reached its highest level since March 2007 On Thursday, the pan-European Euro STOXX 600 .STOXX rose
0.94%. Germany's DAX .GDAXI was up 0.84% and France's CAC 40
.FCHI 1.27%, while Britain's FTSE 100 .FTSE edged up 0.2%.
"There's a little bit of calm back in the market at the
moment," said Peter Kinsella, global head of FX strategy at UBP.
"But the ball is very much in Trump's court."
MSCI's world stocks index .MIWD00000PUS , which tracks
shares in 47 countries, rose 0.22%. It remains down 1.6% for the
week and more than 3% since the start of August.
E-Mini futures for the S&P 500 ESc1 gained 0.22%, pointing
to a stronger open on Wall Street.
RECESSION FEARS
Investors ran for the safety of bonds this week as fears of
a recession jumped.
Long-term borrowing rates hit their lowest ever -- the
aggregate yield on a Bloomberg-Barclays index of seven- to
10-year bonds worldwide dropped to a record 1.44% on Wednesday.
Yields on U.S. 30-year bonds US30YT=RR fell as low as
2.123% overnight, not far from a record low of 2.089% set in
2016. Ten-year yields US10YT=RR dropped further below
three-month rates, an inversion that has reliably predicted
recessions in the past. US/
The Philippines became the latest country to cut interest
rates, following aggressive moves by central banks in New
Zealand, India and Thailand that had surprised markets on
Wednesday. "Financial markets are raising risks of recession," said
JPMorgan economist Joseph Lupton. He said the "alarm bell" was
loudest in the government bond market.
Markets have ramped up their expectations for more easing by
the U.S. Federal Reserve, but the question remains how fast Fed
policymakers will move.
Futures 0#FF: moved to price in a 100% probability of a
Fed cut in September and a near 24% chance of a half-point cut.
Some 75 basis points of easing is implied by January, with rates
ultimately reaching 1%. FEDWATCH European and U.S. government bond yields rose on Thursday,
with German DE10YT=RR and French FR10YT=RR 10-year yields up
from record lows after a rally in recent sessions. The 10-year U.S. Treasury yield rose to 1.7275% from as low
as 1.595% on Wednesday.
Few investors think the United States and China will be able
to resolve their trade row any time soon and many are bracing
for another confrontation.
"This most recent escalation in the U.S.-China trade clash
has increased the risk of a complete fallout in the negotiations
considerably," said Vasileios Gkionakis, a strategist at Lombard
Odier, adding that the probability of a "deal breakdown" had
increased to 40% from 25% previously.
Gold has surged this week as investors scrambled to find
somewhere safe to park their cash, rising above $1,500 for the
first time since 2013.
Spot gold XAU= was last at $1,495 per ounce, down from as
much as $1,510 on Wednesday. Gold is up 16% since May. GOL/
In foreign exchange markets, the Japanese yen rose again,
gaining 0.2% to 106.08 yen per dollar JPY=EBS , although it
remains off its weekly high of 105.5 hit on Tuesday. The yen
tends to gain at times of uncertainty, and its rise this week
underlined investors' fears.
China's yuan also gained. In the offshore market it rose
0.2% to 7.0735 yuan per dollar after touching 7.14 yuan on
Tuesday.
The dollar was steady, trading at $1.1196 EUR=EBS against
the euro.
Oil prices regained some ground on expectations that falling
prices could lead to production cuts. O/R Brent crude LCOc1 climbed 0.7% to $57.48, which followed
steep losses on Wednesday. U.S. crude CLc1 rallied 1.9% to
$52.08 a barrel.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global borrowing rates slide https://tmsnrt.rs/2MQjRSj
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>