London: US and European stocks clawed back some of their recent losses after China moved to stabilise its currency, providing a respite for investors stung by an escalation in trade tensions.

The S&P 500 Index advanced while manufacturing shares led the Stoxx Europe 600 higher as China fixed the yuan at stronger than 7 per dollar, the level that spurred a global sell-off Monday. The dollar steadied and gold held on to Monday’s gains, while Treasuries gave back some of yesterday’s surge, when they reached the most extreme yield-curve inversion since the lead-up to the 2008 financial crisis.

China’s move to stabilise the yuan offered some reassurance that the trade conflict between the world’s two largest economies might be contained. But it came hours after the US had designated the country a currency “manipulator,” a move that could open the door to new penalties on top of the tariff hikes already imposed on Chinese goods. For its part, China said the recent yuan depreciation was decided by the market, not Beijing, and denied the Trump administration’s accusation.

“The key thing is that they’ve shown they are willing to play with that 7 level,” Andrew Sullivan, Pearl Bridge Partners director, said on Bloomberg TV. “The market really doesn’t have a firm grip on how far the currency could go.”

Meanwhile, White House Chief Economic Adviser Larry Kudlow said the US expects China to visit for more trade talks in September.