In a sign of the turbulence in China, the Shanghai Composite plunged another 7.6% on Tuesday. The Standard & Poor’s 500 index climbed 38 points, or 2 percent, to 1,932.
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Australian S&P/ASX 200 shed some gains from Wednesday’s session, and is down 1.2 per cent.
The official Global Times newspaper sought to calm readers by emphasizing that “the Chinese stock market and the economy are not closely related”.
The Nasdaq composite opened at 4,687, up from its previous close of 4,526. The ringgit was last down 1.4 per cent at 4.2720 against the US dollar from its level late in Asia Tuesday.
Other world markets rebounded yesterday with stocks, oil prices and bond yields all rising after China cut interest rates and banks’ reserved requirements in a bid to kick-start its wavering economy. Japan’s main index fell 4 percent, and the Shanghai index dropped 7 percent, continuing four days of decline.
The big gains underscore how much China matters to the global markets. Rob Subbaraman, an economist at Nomura Securities, said: “It would appear that China’s structural headwinds, including overcapacity and over-leverage, are once again wearing on growth“.The scope to ease policy is far from exhausted for China, he said.
“The Chinese economy is going to be on this bumpy road for a while and it will have ebbs and flows that will no doubt have a serious impact on the global economy”, he says.
A rally in US stocks evaporated just minutes before the closing bell Tuesday, sending the Dow Jones industrial average down 204.91 points, or 1.3 percent, at 15,666.44 and extending Wall Street’s losing streak to six days – the longest such stretch in more than three years. It hit 94.7 earlier in the day.
This was compounded by another turbulent session on Asian markets overnight to send the FTSE more than 2%, or around 130 points lower, shortly after opening, before paring back some of the losses. The central bank also said it would require large banks to keep less cash in reserve starting in early September, a move that should boost activity by making it easier for banks to lend money.
The Bank also announced it is cutting the one year lending interest rates by 0.25 percentage points, from 4.85% to 4.6%, as well as the deposit rate, which has been cut to 1.75% from 2%.
Chinese authorities have moved to assure investors that despite the ongoing volatility – and their failed efforts to stop it – the economy is sound.
Benchmark U.S. crude gained $1.31 to $39.55 per barrel in electronic trading on the New York Mercantile Exchange.
But other markets in Asia posted modest recoveries.
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Hong Kong’s Hang Seng Index HSI, -1.52% which waffled between positive and negative territory, finished down 1.5%.
