Global markets bounce back as Trump downplays US-China trade war

US and European stocks regained ground on Tuesday after US President Donald Trump downplayed the US-China trade war as "a little squabble" a day after a spike in tensions between the world's two largest economies rattled financial markets.

Fears that the United States and China were spiraling into a fiercer, more protracted trade dispute that could derail the global economy have shaken investors in the past week. On Monday, MSCI's gauge of stocks across the globe posted its biggest one-day decline in over five months and touched a two-month low. The MSCI index gained 0.49 percent on Tuesday.

Trump insisted trade talks with China had not collapsed, while China's Foreign Ministry spokesman said the two sides had agreed to continue pursuing relevant discussions. This followed Washington's decision last week to hike its levies on $200 billion of Chinese imports to 25 percent from 10 percent.

On Wall Street, technology stocks led the rebound but major indexes finished below their session highs. The Dow Jones Industrial Average rose 207.06 points, or 0.82 percent, to 25,532.05, the S&P 500 gained 22.54 points, or 0.80 percent, to 2,834.41 and the Nasdaq Composite added 87.47 points, or 1.14 percent, to 7,734.49.

The pan-European STOXX 600 index rose 1.01 percent.

The U.S. benchmark S&P 500 recorded its biggest one-day loss since Jan 3 on Monday, after China struck back in the trade dispute by saying it would impose higher tariffs on a range of U.S. goods.

“It’s likely that it will take markets a day or two to adjust to this increased rhetoric around trade, because markets up until a week ago thought that trade had been put to bed,” said Carol Schleif, deputy chief investment officer with Abbot Downing in Minneapolis.

In another sign trade tensions are hurting the economic outlook, Germany's ZEW institute said investors' mood had deteriorated unexpectedly in May.