LONDON: World oil prices recovered slightly on Wednesday after a plunge, while stock markets and the dollar diverged as traders tracked economic headwinds.

While some market tensions have eased since US President Donald Trump and Chinese counterpart Xi Jinping at the weekend agreed to resume talks aimed at tackling their trade war, concerns about weak global growth have returned to the fore.

Despite another record-high finish for the S&P 500 Tuesday on Wall Street, "there's growing concern that the upside for stocks is looking limited", noted James Hughes, chief market analyst at Axitrader.

"Concerns continue to propagate that global growth is incredibly fragile."

However China on Wednesday appeared to temper expectations for near-term stimulus measures for the world's number-two economy.

It comes after data showed factory activity in China continued to shrink in June, adding to worries about the key driver of global growth.

The release of US jobs data on Friday is in investors' sights, with any weak reading likely to put pressure on the Federal Reserve to announce a deeper-than-expected cut in interest rates.

Markets are pricing in a 25 basis-point cut amid calls for double that figure.

It comes as Bank of England boss Mark Carney warned of a "widespread" slowdown in the world economy from rising protectionism.

His comments Tuesday came as it emerged that the White House had proposed tariffs on $4 billion in European imports over European subsidies for commercial aircraft.

"Trade optimism is beginning to fade as the truce with China is not even a week old and the US is looking for its next trade battle," said OANDA senior market analyst Alfonso Esparza.

On Wednesday meanwhile, oil prices recovered modestly after data showed another drop in US crude stockpiles, but the rebound made only a dent in the four-percent slump Tuesday triggered by weak demand growth worries.

The commodity has endured a volatile week, having surged Monday as Russia and Saudi Arabia agreed to prolong their output caps.

"Growth concerns continue to weigh on the crude market and the markets are beginning to query to what extent can OPEC+ continue to cut production in sustaining prices," Howie Lee, an economist at Oversea-Chinese Banking Corp, told Bloomberg News.

"Production levels have already been severely reduced and there is limited scope for further supply curbs." —AFP