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By Geoffrey Smith
Investing.com -- Fears for the U.S. economic recovery send a chill through markets. The dollar hits a two-year low against the euro and other currencies after weak labor market data, signs of a delay to the next stimulus package and hawkish words on China from Donald Trump. China's stock market falls heavily. The euro hits a 22-month high as the eurozone economy returns to growth. Intel (NASDAQ:INTC) stock slumps after announcing another delay to a key project, and Disney is also struggling to deliver on its pipeline of money-spinning movies. Here's what you need to know in financial markets on Friday, July 24th.
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1. Fears for U.S. rebound as labor market, stimulus talks stall
Concerns that the U.S. economic recovery may be faltering sent a chill through global markets, hitting risk assets and supporting havens.
The yield on the U.S. 10-Year Treasury note fell to 0.56%. It has only ever closed below that level once, back in April. Gold futures, however, failed to break through the $1,900 level for the second day in a row.
The move was triggered on Thursday by a combination of a rise in weekly initial jobless claims and a fresh delay to the announcement of Republican plans for the next package of stimulus measures. These will now only be published next week, according to Senate Majority Leader Mitch McConnell.
2. Chinese markets fall as Trump threatens trade deal
Another factor weighing on risk assets is the latest diplomatic spat between China and the U.S. Beijing ordered the U.S. to close its consulate in Chengdu in a tit-for-tat response to Washington’s closure of the Chinese consulate in Houston at the start of the week.
At his press briefing on Thursday, U.S. President Donald Trump appeared to prepare the ground for further trade measures against China, saying that the phased trade deal that the two countries signed at the start of the year “means less to me now than when I made it,” due to China’s role in the spread of the coronavirus.
Chinese stocks reacted badly to the threat, the Shanghai Shenzhen CSI 300 falling 4.4% to its lowest in three weeks. The dollar, meanwhile, rose to a three-week high of 7.0236 yuan before retracing slightly.
3. Euro hits 22-month high as eurozone returns to growth
The dollar lost ground against many other currencies, however, strengthening suspicions that it is in for an extended decline against developed-world currencies after giving up its interest rate premium and now also appearing to be on the brink of another economic relapse.
The dollar index which tracks the greenback against a basket of six developed currencies, took out its April low to hit its lowest level since September 2018. The euro, in particular, gained across the board, breaking through $1.16 for the first time in nearly two years.