U.S. shares clawed back some of their recent losses after China moved to stabilize its currency. But gains were muted as investors weighed the outlook for corporate profits amid trade tensions between the world’s two largest economies.

The S&P 500 Index rose as much as 1 per cent before erasing most of the advance as Citigroup Inc. warned that the conflict will persist long enough to dent any earnings rebound for corporate America. The dollar steadied and gold held near a six-year high as China fixed the yuan at stronger than 7 per dollar, the level that spurred a global sell-off Monday. Treasuries gave back some of yesterday’s surge, which created the most extreme yield-curve inversion since the lead-up to the 2008 financial crisis.

China’s move to stabilize 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 U.S. 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.

“Everybody’s kind of posturing here and the undertone is there’s a lot of geopolitical risk in this chess match,” said Matt Schreiber, president and chief investment strategist at WBI Investments. “Obviously we have a political cycle in play with an election coming up. It’s a much deeper quagmire than we think.”

Meanwhile, White House Chief Economic Adviser Larry Kudlow said the U.S. expects China to visit for more trade talks in September. Bloomberg reported the People’s Bank of China reassured a number of foreign exporters the yuan won’t continue to weaken significantly and the companies’ ability to buy and sell dollars would remain normal.

The Stoxx Europe 600 erased gains and dropped for a third straight day. The yen slipped from its strongest closing level in more than a year. The benchmark gauge for Asian stocks fell for a fifth session.

Elsewhere, Bitcoin broke above US$12,000 for the first time in three weeks before erasing its gain. The pound strengthened as opponents of a no-deal Brexit hardened their plans to stop Prime Minister Boris Johnson from possibly trying to leave the European Union with no agreement.

These are some key events to watch out for this week:

Earnings from financial giants include: UniCredit, AIG, ABN Amro Bank, Standard Bank, Japan Post Bank.
Central banks with rate decisions Wednesday include India and New Zealand.
A string of Fed policy makers speak this week, including St. Louis chief James Bullard on Tuesday and Chicago’s Charles Evans a day later. Both are Federal Open Market Committee voters.

Here are the main moves in markets (all sizes and scopes are on a closing basis):

Stocks

The S&P 500 Index rose 0.3 per cent as of 11:32 a.m. New York time.
The Stoxx Europe 600 Index fell 0.4 per cent.
The MSCI Asia Pacific Index declined 0.7 per cent, hitting the lowest in almost seven months.

Currencies

The Bloomberg Dollar Spot Index was little changed.
The euro was little changed at US$1.1202.
The British pound gained 0.1 per cent to US$1.216.
The Japanese yen sank 0.3 per cent to 106.28 per dollar.
The onshore yuan jumped 0.4 per cent to 7.0203 per dollar, the biggest increase in six weeks.

Bonds

The yield on 10-year Treasuries increased three basis points to 1.73 per cent, the first advance in more than a week.
Britain’s 10-year yield rose one basis point to 0.52 per cent.
Germany’s 10-year yield decreased two basis points to -0.54 per cent, hitting the lowest on record with its eighth straight decline.

Commodities

Gold rose 0.4 per cent to US$1,469.97 an ounce to the highest in more than six years.
West Texas Intermediate crude climbed 0.3 per cent to US$54.82 a barrel.

--With assistance from David Ingles, Cormac Mullen, Andreea Papuc and Laura Curtis.