By Sujata Rao
LONDON (Reuters) - Shares were under pressure for a second day on Wednesday and the dollar held near one-week lows after a threat by U.S. President Donald Trump to slap $60 billion in tariffs on Chinese imports rekindled investors' concerns about the economic growth outlook.
Equities attempted to recover after Tuesday's hefty losses, heartened by robust Chinese factory data, with S&P500 futures signalling a firmer opening for Wall Street.
The Tillerson news, coming days after the exit of Gary Cohn, a strong free trade proponent, had sent the dollar skidding, pushed world stocks lower and bond prices higher.
"All this is creating very uncertain times for markets," said Peter Lowman, CIO of UK wealth manager Investment Quorum.
The negative momentum faded somewhat in Europe, with a pan-European equity index up 0.3 percent after it fell 1 percent on Tuesday.
That left MSCI's all-country equity index down only marginally, its second day in the red and off one-month highs hit before news broke of Tillerson's sacking.
"The market probably correctly viewed this move as weakening internal White House opposition to some of Trump's less market-friendly policies, in particular the President's trade policy," Daiwa strategist Mantas Vanagas said.
The dollar has been another casualty, though it swung 0.15 percent higher after three days of losses. U.S. Treasury yields traded just off one-week lows touched earlier in the session.
German 10-year government bond yields approached one-month lows and stand 20 basis points below this year's peak, at 0.60 percent.
The trade war fears at least temporarily eclipsed data from China which showed industrial output expanding at a surprisingly faster pace at the start of the year. Fixed asset investment also beat forecasts, while retail sales improved.
Morgan Stanley analysts said the data suggested "that some tariff-related losses within its export business may be absorbed by strength elsewhere."
The data highlighted the relatively robust position of China's and also the world's economy. The latter is slated to grow this year by 3.9 percent, according to the International Monetary Fund's forecast in January.
But with inflation remaining subdued, markets do not see U.S. interest rates rising faster than currently priced, while European and Japanese rate rises remain a distant prospect.
While a U.S. rate rise next week is already priced in, Tuesday's data showing annual U.S. core inflation steady at 1.8 percent did not persuade markets the Federal Reserve would raise rates more than three times this year [nL1N1QU184].
That, along with the trade war fears, is keeping the dollar from strengthening much against a basket of currencies. It failed to make headway against the yen, against which it had briefly hit three-week highs around 107 yen.
The former said most of its policymakers believed it should "persistently" pursue powerful monetary easing.
The euro slipped 0.2 percent against the dollar, inching off an overnight one-month high after European Central Bank President Mario Draghi said the ECB needed more evidence that inflation was rising towards target.
He warned of risks from "possible spillovers of the new trade measures announced by the U.S. administration."
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)