By Alexander Osipovich and Paul J. Davies
U.S. stocks fell after President Trump raised the possibility that a meeting with China on trade might be canceled, capping a tumultuous week driven by the trade war and emerging currency fight with Beijing.
The Dow Jones Industrial Average slid 0.8% in midmorning trading on Friday. The S&P 500 dropped 0.9%, while the tech-heavy Nasdaq Composite was down 1.2%. The indexes had been down to open the day and fell further as the president commented on trade progress.
"We're not ready to make a deal, but we'll see what happens," Mr. Trump told reporters Friday morning. "We will see whether or not China keeps our meeting in September."
Global markets have swung wildly this week after moves from China's central bank triggered fears that the trade fight with the U.S. could spread to a new front in the foreign-exchange markets.
But what began as a rout on Monday -- with U.S. stocks suffering their worst one-day drop of the year -- reversed course as Beijing didn't take as aggressive a stance on weakening the yuan as some investors had feared. The S&P 500 rebounded 1.9% on Thursday, before resuming its drop today.
Investors fled to the safety of government bonds. The yield on the 10-year U.S. government bond tumbled to 1.693% on Friday, from 1.710% on Thursday. Yields move in the opposite direction as prices. Gold climbed 0.2% to $1,512.30, putting the precious metal on track for its highest settle in more than six years.
"The prospect that both governments were going to reach for measures that they hadn't previously used was very disappointing for markets this week," said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.
The yuan remained stable Friday, but the offshore rate to the dollar was weaker than a previous key level, with the currency trading at 7.08 to the dollar.
In the U.S., shares of Uber Technologies fell 6.4% after the ride-hailing company reported a bigger-than-expected quarterly loss after markets close on Thursday.
In the U.K., the British pound touched multiyear lows against the euro and the dollar after official data showed the economy shrank 0.2% in the second quarter. The currency fell as low as EUR1.0762, the lowest since October 2009, and $1.2057, the lowest since early 1985, excluding a minutes-long "flash crash" in October 2016. The yield on 10-year gilts slipped to 0.481%.
More broadly in Europe, the benchmark Stoxx 600 index dropped 0.7%. Though stocks slipped Friday, they have regained ground from earlier this week because of the absence of a further deterioration in U.S.-China tensions, said Chris Beauchamp, chief market analyst at IG Group.
"You've had a decent recovery in risk appetite this week. It's still up in the air if this is short term," Mr. Beauchamp said. "With or without Brexit, you've got a weakening eurozone that is circling the drain of recession."
Italian government bonds were sold off heavily, pushing yields sharply higher after Matteo Salvini, the head of the far-right League party, sought to trigger elections.
China's Shanghai Composite Index fell 0.7% after economic data on Friday showed that producer prices have fallen into deflation for the first time in three years, as worries over the trade war with the U.S. sapped demand.
In commodities markets, U.S. crude oil was up 3.4% at $54.32 a barrel.
--Caitlin Ostroff and Anna Isaac contributed to this article