AUGUST 26 2015 00:13h
Frankfurt (dpa) – European shares rebounded, but US markets ended lower on Tuesday after China trimmed interest rates to shore up confidence in the world's second-biggest economy.
China's central bank cut interest rates for the fifth time since November, seeking to pump more money into the economy and to counter fears about the growth outlook that had triggered a massive selloff of global shares on Monday.
Dealers said that after "Black Monday" came "Turnaround Tuesday," which saw Europe's benchmark Stoxx 50 of leading stocks rise nearly 5-per-cent to 3,218 points in after-the-close trading.
The Stoxx 50 index reflected similar gains across major European bourses as it clawed back some of the big losses chalked up on Monday. The Stoxx 50 index closed down 5.61 per cent on Monday.
Shares in Paris also powered ahead by more than 4 per cent, while stocks in London – Europe's biggest stock exchange - rose 2.96 per cent.
"In our view, the latest China frenzy on financial markets is exaggerated," said Andreas Rees, economist with Italy's Unicredit Bank. "The moderate (economic) recovery in the US and the eurozone will at least compensate for the weakness coming from emerging Asia," he said.
In New York, the blue chip Dow Jones Industrial Average initially rebounded by 440 points Tuesday, but as worries over what will happen in China's market took hold, investors began a sell-off late in the day.
The Dow slid 1.3 per cent to 15,666 at the close. The Standard & Poor's 500 Index at one point was up 2 per cent, but in the last two hours of trading dove to close down 1.4 per cent to 1,868. The tech-heavy Nasdaq gained 2.6 per cent in early trading, but fell back to close down 0.4 per cent to 4,506.
Analysts also warned that markets are likely to face a period of volatility in the coming days.
The announcement of the 0.25-percentage-point cut in China's benchmark one-year lending rate by to 4.6 per cent also came too late for several Asian bourses.
Japan's benchmark Nikkei 225 Stock Average plummeted nearly 4 per cent Tuesday, after Shanghai Composite Index finished the trading session down a hefty 7.6 per cent.
The Chinese monetary authorities also announced on Tuesday that its deposit rate was also cut by a quarter percentage point to 1.75 per cent.
However, signs of a recovery emerged among several bourses in the region with shares in Australia jumping by 2.6 per cent after investors had been on a roller-coaster ride during the trading day.
Stocks in South Korea, India and Hong Kong also closed higher.
Shares in Taiwan bounced back on Tuesday after the government in Taipei announced plans to inject funds from the state-owned National Stabilization Fund into the stock market to "bolster investor confidence," after the nation's bourse suffered the worst day in its history on Monday.
After decades of robust economic growth, China has experienced a slowdown in recent years, with gross domestic product in 2014 expanding at its slowest rate in 24 years, missing official targets.
Slowing growth has recently forced China's central bank to adopt several stimulus and loosening measures to bolster the economy, including multiple interest rate cuts and this month's surprise yuan devaluations.
The government on Sunday moved to allow pension funds to invest in the stock market, hoping to bolster share prices.
A surprise gain in key business confidence in Germany also helped to boost stocks in Europe's biggest economy with Frankfurt’s main DAX index climbing more than 4 per cent.
"The German economy continues to be a rock in turbulent waters," said Ifo chief Hans-Werner Sinn.