By Caitlin Ostroff and Joanne Chiu
-- S&P 500, Dow futures fall
-- Government bond yields extend declines
-- U.S. production and retail sales data due
Global stocks fell after China vowed to take "necessary counter-measures" over U.S. plans for a new tariff on Chinese imports.
The moves come a day after the Dow Jones Industrial Average posted its steepest drop this year on growing fears of a recession.
Futures for the S&P 500 and the Dow Jones Industrial Average slipped 0.6%.
Meanwhile the yield on the benchmark 10-year Treasury note extended its decline early Thursday, touching 1.545% -- the lowest in three years -- after hitting 1.574% Wednesday. Yields fall as prices rise.
Investor appetite for very long-term bonds saw strong demand for 30-year Treasurys, pushing up their prices and cutting their yields to less than 2% for the first time ever during Asian trading hours. The yield touched 1.966% but later recovered to 2.001%, according to TradeWeb.
Stocks in China rebounded from early declines. The Shanghai Composite rose 0.3%, while Hong Kong's Hang Seng reversed early losses to gain 0.4%.
However, Australia's S&P/ASX 200 dropped 2.9%, its biggest drop since February 2018. The country's big four banks all fell, as Australian government bond yields hit a new low at 0.883%. Japan's Nikkei 225 shed 1.3%.
The Stoxx Europe 600 slipped 1.3% and the German DAX fell 1.8%, a day after Germany reported a contraction in the second quarter. Compounding Germany's growth decline is that it is more likely to be hurt by U.S.-China trade tensions due to its open economy, said Altaf Kassam, head of EMEA strategy at State Street Global Advisors.
Among the biggest gainers was Swedish food and health retailer ICA Gruppen AB, whose shares rose 7.6% on strong earnings. Carlsberg AS shares also rose 4.8% after it reported strong growth of its core beer business in Asia.
In U.S. markets on Wednesday, the Dow industrials posted its biggest decline this year, after German and Chinese data rekindled concerns about a global economic slowdown, and long-term bond yields fell below shorter-term rates. That inversion of the yield curve sent a fresh warning about the risks of a coming recession.
"Most of the attention has been on an inversion of the yield curve," said Stefan Hofer, chief investment strategist at LGT Bank Asia. "The market is looking at warning signals, but it's not yet fully convinced that we're in danger of a global recession or a major downturn," he said.
However, Mr. Hofer said while previous inversions often preceded recessions, the yield curve's predictive power had been distorted by massive asset purchases, or quantitative easing, by central banks. Meanwhile, he said trade relations presented a major threat to global growth.
This week, President Trump abruptly postponed plans to impose new tariffs on about $156 billion in goods from China, but Beijing hasn't made any subsequent trade concessions.
Gerry Alfonso, a Shanghai-based director of trading at Shenwan Hongyuan Securities, said Chinese equities were somewhat insulated from the Wall Street selloff, since it was focused mainly on growth rather than trade concerns. He said Chinese investors were more domestically focused.
Investors will look to fresh U.S. economic data for further indication about the strength of the economy. The Commerce Department will publish July retail sales data Thursday, after June saw the fourth consecutive uptick in American spending, a sign that consumers are a source of strength in the U.S. economy.
Mr. Mahon said the retail data will be particularly important as a sign of the U.S. economy. Any weakening of it could drive more investors to the bond market.
"The main message at the moment is the markets are interpreting pretty much every data release negatively," he said.
The Labor Department also will release second-quarter figures on productivity and costs, showing whether a recent increase will continue, and the Federal Reserve will give new figures on industrial production in July.
Shen Hong contributed to this article.
Write to Joanne Chiu at firstname.lastname@example.org