US markets surge after China cuts rates

China’s central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months on Tuesday, ratcheting up support for a stuttering economy and a plunging stock market that has sent shockwaves around the globe. The Nasdaq composite added 53 points, or 1.2 percent, to 4,560.

But Shanghai fell 1.27 per cent, or 37.68 points, to 2,927.29, after a day that saw it veer wildly between losses and gains of around four per cent, while Hong Kong lost 1.52 per cent, or 324.57 points, to 21,080.39.

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.

China announced a new round of measures designed to boost the economy late Tuesday, cutting interest rates and allowing banks to lend more. China’s downturn and global market turmoil have also created fresh uncertainty over whether the US Federal Reserve will begin raising interest rates this year.

“A certain calm has descended on Asian markets today, allowing traders to catch a much-needed breath”, Chris Weston, chief market strategist at IG, said in a market note.

Offshore one-year non-deliverable forwards contracts, considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.6675, or 3.88 percent weaker than Thursday’s midpoint.

However, China’s market continued to sustain losses.

The three indexes have closed lower five days in a row, with the Dow falling almost 1,700 points in that time.

They have been badly hit by the slowdown in China and its impact on commodity prices.

Data on Tuesday showed U.S. consumer confidence increased to a seven-month high in August. However, he also stated that the situation could still change before the Fed’s next policy meeting scheduled for mid-September.

Energy company Pepco Holdings declined the most in the S&P 500 on Tuesdsay after regulators in Washington rejected its proposed merger with Exelon.

Meanwhile, the major European markets have all moved to the downside on the day. The Nasdaq rose as much as 3.6 percent before ending down 0.44 percent.

The bigger, more intractable problem is how to rebalance the economy away from its overreliance on investment in construction and property investments while trying to keep growth at a high level.

That had followed a 10-day run of declines for the index, its longest losing streak since 2003, including a 4.7% fall on Monday that was the joint-worst one-day drop since the dark days of the downturn in 2009. The sector was up 2.7 percent.