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US stocks initially posted their sharpest rally of the year in Tuesday morning trading after investors looked for bargains a day after Wall Street’s worst performance in four years.

The People’s Bank of China, the country’s central bank, on Tuesday morning moved to devalue its tightly controlled currency, the Yuan, following weaker than expected Chinese import and Export data over the weekend.

The US stock market has rebounded slightly following an early trading plunge in the wake of a big drop in Chinese stocks. Minutes after the opening bell Monday, the major indices tumbled wildly, making Friday’s 530-point sell-off in the Dow look like a minor blip, but...

Shares in banks and asset managers also fell, and the Euro STOXX Volatility Index rose to its highest since late 2011 – more evidence of investor unease.

European markets continued to fall during the trading session as fears of currency wars ignited a fresh bout of selling across global markets.

In addition, the PBOC is reducing the reserve requirements (RRR) for most big banks from 18.5 percent to 18.0 percent.

It also increased the amount of money available for lending by reducing the minimum reserves banks are required to hold by 0.5%.

China has sought to calm its panic-stricken stock markets by cutting interest rates and loosening constraints on bank lending after a second day of plunging share prices.

The speed at which this happened yesterday was eerily reminiscent of the May 6, 2010 flash crash, as bids seemingly disappeared only to resurface as fast as they vanished.

The rule has been used only a few times in recent history, including during the global recession in January 2008 and in May 2010. This followed a dramatic drop in pre-market open futures, with the Dow Jones Industrial Average futures falling more than 700 points.

The Shanghai Composite Index was down 4.3 percent at 3,071.06 at midday Tuesday after falling 6.4 percent in the first minutes of trading.

The daily said that market capitalisation fell by Rs. “This is the biggest one-day slump in China since 2007”.

The cause of the global market volatility centres on fears that the world’s second biggest economy is slowing. “And I don’t see any signs of meaningful government intervention”.

U.S. stock indices had gone almost 1,000 days without a 10 percent decline from their recent peaks, an unusually long stretch given that corrections usually happen once a year on average.

The S&P 500 slid 77.68 points, or 3.9 percent, to 1,893.21. Investors access the group via the Powershares DWA Momentum Portfolio, an exchange-traded fund that saw assets balloon to more than US$2 billion in August.