China: Shanghai stocks open up 1.73%

Stocks once again showed a strong move to the upside at the start of trading on Wednesday, mirroring the performance seen in the previous session.

Excluding a sharp increase in orders for transportation equipment, durable goods orders rose by a more modest 0.6 percent in July following a 1.0 percent increase in June. The biggest single-day point decline for the Dow was 777 points, during the financial crisis in September 2008.

Chinese stocks have plummeted about 16% over the last week, rattling markets worldwide as investors grew more concerned about the Chinese leadership’s ability to prop up the country’s ailing economy.

Major U.S. stock indexes reversed all their gains, with the S&P 500.SPX ending down 1.4 percent after giving up gains of as much as 2.9 percent earlier in the day.

Stovall noted that during the recent turmoil, the S&P 500’s price-to-earnings ratio only fell back to the median level of the last 15 years.

China’s Shanghai Composite index closed with a decrease of 7.6 percent, at 2,964.97 points, at the end of trading and Japan’s Nikkei 225 index closed down with a decrease of 4 percent.

“These type of swings are typical when the market behaves in a way that is a real test of nerves and there is a lot of ongoing uncertainty”, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

Beyond China, traders are waiting for clarity from the Federal Reserve, which has signaled it could begin raising its key interest rate from near zero for the first time in almost a decade as early as this year.

“That certainly helped the market”, Krosby said.

The FTSEurofirst, which risks posting its biggest monthly loss in seven years, suffered its worst one-day drop since November 2008 on Monday, and rallied in the following session after a Chinese interest rate cut boosted markets.

“I wouldn’t say it is full-blown panic”, said Brennan Miller, a branch manager for Charles Schwab in Chicago. “This caught people off guard”.

He added: “We do face a fundamental problem I think in the world that we piled up before 2008, primarily actually at that time on the private side, not the public side, so much debt that we really don’t know how to get rid of it now”.

Utilities lagged. Energy company Pepco Holdings declined the most in the S&P 500 after regulators in Washington, D.C., rejected its deal with fellow utility Exelon. The Nasdaq is down just 0.8 percent.

Still, many in Asia took heart from China’s moves.

Europe’s main stock markets fell on Wednesday, with London’s benchmark FTSE 100 index shedding 1.7 per cent to close at 5,979.20 points. The Standard & Poor’s 500 index gained 37, or 2 percent, to 1,904.

In other trading, US crude oil rose 1 cent to $39.32 (NZ$60.49) a barrel in electronic trading on the New York Mercantile Exchange.