The unexpected 130 billion yuan ($19.94 billion) injection by the central bank during open market operations – the largest such injection since September – appeared timed to reassure Chinese retail investors, who are always sensitive to liquidity signals, that the bank would support the market with cash.
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The Dow Jones Industrial Average reacted harshly to a big drop in Chinese stocks overnight, falling over 450 points on Monday, more than 2.5 percent, in mid-morning trading.
France’s CAC40 was up 0.15 per cent; London’s FTSE closed 0.55 per cent in the black, while Germany’s DAX recovered from a major sell-off on Monday to close up 0.03 per cent.
The Shanghai market slumped 6.86 per cent yesterday after the release of weak manufacturing data heightened worries about the health of the world’s second-largest economy, sparking a wave of selling of global equities.
Last year, China initiated a “circuit breaker” rule to slow down markets and ease panic when stocks fall by 5 percent or more.
The trading halt was China’s first-ever use of circuit breakers – a kind of emergency brake – on main exchanges. Dow futures fell 0.5 percent and S&P 500 futures slipped 0.5 percent.
CHINA MEASURES: The stock market in China itself steadied further after news that Beijing would keep market steadying measures in place.
“The moves seen in Chinese stock markets are quite concerning”, said Angus Nicholson, market analyst at IG in Melbourne, Australia.
“While China’s market is relatively small and undeveloped compared to stock markets in other major economies there is a tendency to view it as a proxy for wider problems in the management of China’s economy”.
Global stocks were down on Tuesday but off the lows they hit in the previous session. In Europe, the pan-regional FTSEurofirst 300 index rose 0.66 per cent to 1,410.37.
Escalating tensions in the Middle East, which affected oil prices, also dented investors’ confidence.
The euro fell 0.7 percent to $1.0752.
Shanghai’s rebound lifted neighboring markets after losses in earlier trading.
If the market falls by 7%, all trading is suspended and the market closes for the day, which is what happened on Monday.
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OVERSEAS MARKETS: Chinese shares shrugged off government efforts to prop up the country’s sputtering stock market.
