Dow bounces more than 200 points after Trump claims China 'wants to make a deal'

U.S. stocks rebounded Monday as investors saw some room for optimism on the global trade front after Friday's free-for-all shaved 623 points, or 2.4 percent, off the Dow Jones industrial average.

The Dow bounced more than 200 points Monday after President Donald Trump claimed China was looking to make a trade deal, just days after new escalations in the year-long conflict rocked global markets and sparked greater fears of an economic slowdown. The Standard & Poor's 500 and Nasdaq Composite indexes also climbed.

On Friday, Beijing announced retaliatory tariffs on $75 billion in U.S. goods and reinstated auto levies that will go into effect this fall. The move outraged Trump, who responded by raising tariffs on all $550 million in Chinese imports and ordering U.S. companies to cut ties with China in a signature tweetstorm, prompting sharp and immediate criticism from the U.S. business community, which warned that halting sales with such a large trading partner would hurt American companies and the broader economy.

By the end of the day Friday, the Dow Jones industrial average had fell 600 points, or nearly 2.4 percent, and the business community was warning of negative effects on investor confidence and American jobs.

Despite Friday's carnage, at the Group of 7 summit in France over the weekend, Trump painted a much more optimistic picture, saying there had been two "very good" calls with China. The comments were similar to ones Trump has made for more than a year, and his public optimism has been repeatedly dashed. But he insists that this time is different. He said the new talks "were much more meaningful than at any time."

"We've gotten two calls and very, very good calls," Trump told reporters here at the Group of Seven summit. "Very productive calls. They mean business. They want to be able to make a deal."

Trump did not offer concrete details, and China did not confirm the major progress Trump cited. Chinese officials are expected to visit the U.S. to resume negotiations in September.

The abrupt escalation in the trade war Friday coincided with a high-profile speech from Jerome Powell, chairman of the Federal Reserve and frequent target of the president's ire, as Trump says Powell has not taken aggressive enough action to stimulate the economy. In remarks at the Fed's annual symposium, Powell acknowledged that uncertainty from the trade war was threatening global growth, but offered little insight into the Fed's next moves, cautioning that there are "no recent precedents" to guide policy response to the trade war.

"While monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rule book for international trade," Powell said.

Although Trump maintains the economy is in great shape, he has upped his attacks on Powell as recession warning signals have begun to surface. The manufacturing sector has contracted for the first time in a decade, and sales of U.S. exports have decreased at the fastest pace since 2009. And for the first time since the run-up to the Great Recession, the yields - or returns - on short-term U.S. bonds eclipsed those of long-term bonds. This phenomenon, which suggests investor faith in the economy is faltering, has preceded every recession in the past 50 years.

"Trump has been publicly berating the Fed chair for the last year but has really stepped up his attacks in recent months as the economy has weakened, recession warnings have started flashing red and the need for someone else to blame has intensified," Craig Erlam, an analyst with OANDA, wrote in a note to investors Friday. "The trade war is taking its toll and heading into an election year, Trump does not want fingers pointing at him."

The trade war's effects have ricocheted across the globe. China's economic growth has slowed to its lowest rate in 27 years, as factory output declines and unemployment rises, and central bank leaders in Europe, Asia and Australia have cut interest rates in recent weeks, citing the need for economic stimulus.