Shanghai index plunges more than 6 percent

The U.S. stock market is rising at midday, bouncing back from a discouraging report on manufacturing. The Dow Jones Industrial Average and the S&P 500 notched up 0.4 and 0.5 percent, respectively. The Australian dollar, often used as a liquid proxy of China-related trades, was little changed at $0.7374.

The Shanghai Composite shed 6.2 percent on Tuesday, once again bringing the key index below the 3,800 point mark. In Europe, however, markets look set to take their cues from Friday’s modest gains on Wall Street.

“Investors ran for the exit when the government failed to step in to support the market”, Steve Wang, chief China economist at Reorient Financial Markets Ltd.in Hong Kong, told Bloomberg News.

The Hang Seng Index finished down 0.7% while South Korea’s Kospi was down 0.8%.

Chinese shares fell, despite the government on Friday vowing to support equities for a “number of years” in a bid to end extreme volatility in the stock market.

Asia’s second-biggest economy contracted 1.6 percent in the April-June quarter on bad weather and slowing China demand, according to the latest government data.

The devaluation, which weakened the yuan by 3 percent in three days, amid official statements that there was no reason for further depreciation reflects the dilemma for policy makers as they try to balance the need for financial stability with a desire for stronger exports and the yuan’s inclusion in the global Monetary Fund’s basket of reserve currencies.

Some foreign investors have found a new and simple way to make money from China’s dysfunctional stock markets – by dispensing with market research and playing “follow the leader” instead.

Japan’s benchmark index, Nikkei 225 gained 202.78 points or 0.99 percent to settle at 20,595.55.

Property shares also slid on Tuesday despite encouraging home price data, with the SSEC property sub-index down 3 percent.

US benchmark West Texas Intermediate for September delivery fell 51 cents to $41.99 and Brent crude for October tumbled 57 cents to $48.62 a barrel.

The greenback was quoted at 124.39 yen, up modestly from 124.32 yen in New York late Friday.

Credit Suisse analysts, citing initial estimates from local media, said that the two explosions in the Chinese port of Tianjin last week that killed more than 100 people could generate total insurance losses of $1 billion to 1.5 billion.

Insurers remained under pressure, with Ping An Insurance falling 1.2 percent.