World markets sag despite Chinese rate cut

Shanghai Composite closes lower than previous day after central bank cuts interest rates in hope of calming fears.

    The Shanghai Composite Index ended 1.27 points lower at 2927.29 [Reuters]
    The Shanghai Composite Index ended 1.27 points lower at 2927.29 [Reuters]

    World shares have sagged as investors feared fresh rate cuts in China may not be enough to stabilise its slowing economy or halt a stocks collapse that is wreaking havoc in global markets.

    Europe's main stock markets, which had surged on Tuesday after China's moves, reopened two percent down on Wednesday morning as the jittery mood returned and sent investors back into safe-haven German and United States government bonds.

    China's key share indexes had attempted to move higher several times during Asian trading only to be slapped back by waves of selling, reflecting investors' views that much more support was needed from the government and the central bank.

    Analyst: Expect more volatility in China

    The Shanghai Composite Index on Wednesday closed 1.27 percent down on the previous day at 2927.29, amid fears of more volatility.

    The country's benchmark has fallen dramatically from a 12-month high of more than 5000 points in June, more than 40 percent of its value, causing panic in markets across the globe.

    China's central bank reduced interest rates and slashed the amount of money banks need to hold in reserve on Tuesday, its second such double move in two months, in a bid to bolster slowing growth.

    The measures are not only expected to help boost cash flow in China, but also revive confidence that Beijing can steer the world's second-largest economy away from a hard landing and keep global growth on course.

    The cuts initially fuelled a rebound in global equities, with European shares surging after their heaviest losses since the 2008 financial crisis on Monday, but optimism had fizzled by the end of US trading and Wall Street finished down.

    Since a year-long, debt-fuelled rally collapsed in June, Beijing has unleashed unprecedented measures to support the market, including using state-backed vehicles to buy up shares.

    While the slump in Shanghai may have a limited impact on the broader economy, worth about 13 percent of world output, it reflects dissipating confidence among investors that the sky-high valuations of quoted companies are warranted.

    SOURCE: Al Jazeera And AP


    YOU MIGHT ALSO LIKE

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    Interactive: Coding like a girl

    Interactive: Coding like a girl

    What obstacles do young women in technology have to overcome to achieve their dreams? Play this retro game to find out.

    The War in October: What Happened in 1973?

    The War in October: What Happened in 1973?

    Al Jazeera examines three weeks of war from which both Arabs and Israelis claimed to emerge victorious.