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| Stock Markets Rebound Despite Continued Sell-Off in China | |
| (35 minutes later) | |
| ■ The Standard & Poor’s 500-stock index rose about 2 percent at the open, and the Dow Jones industrial average rose more than 300 points, or more than 2 percent. | |
| ■ In China, the benchmark Shanghai composite index closed 7.6 percent lower. Chinese officials responded by cutting interest rates and easing banks’ reserve requirements. | |
| ■ Most other markets in Asia stabilized or rallied modestly. An exception was Japan, whose stocks closed down 4 percent. | ■ Most other markets in Asia stabilized or rallied modestly. An exception was Japan, whose stocks closed down 4 percent. |
| ■ European equities rebounded, clawing back some of Monday’s losses. The Euro Stoxx 50 rose 4.5 percent in midafternoon trading. In London, the FTSE 100 rose 2.9 percent. | ■ European equities rebounded, clawing back some of Monday’s losses. The Euro Stoxx 50 rose 4.5 percent in midafternoon trading. In London, the FTSE 100 rose 2.9 percent. |
| ■ The international and American oil benchmarks rebounded, despite concerns about oversupply. | ■ The international and American oil benchmarks rebounded, despite concerns about oversupply. |
| After a three-day rout that erased nearly $3 trillion in value from stocks globally, markets other than China’s on Tuesday showed signs that selling pressures were easing. | |
| Shanghai stocks closed down 7.6 percent on Tuesday, after Monday’s 8.5 percent plunge, and Beijing officials sought to stabilize financial markets by cutting interest rates and reducing the amount of money banks are required to keep on hand to guard against risk. | Shanghai stocks closed down 7.6 percent on Tuesday, after Monday’s 8.5 percent plunge, and Beijing officials sought to stabilize financial markets by cutting interest rates and reducing the amount of money banks are required to keep on hand to guard against risk. |
| Stocks in Europe opened higher and kept climbing. The Standard & Poor’s 500-stock index rose about 2 percent at the open, and the Dow Jones industrial average rose more than 300 points, or more than 2 percent. | |
| It is too soon to know whether the rebound will last, but there were signs on Tuesday that many analysts might have been right in saying that the recent global sell-off of stocks and commodities was an overreaction to China’s specific economic and financial market problems. | It is too soon to know whether the rebound will last, but there were signs on Tuesday that many analysts might have been right in saying that the recent global sell-off of stocks and commodities was an overreaction to China’s specific economic and financial market problems. |
| Elsewhere in Asia, the free fall of the past few days appeared to have ended. Japan was an exception, where stocks were off by 4 percent. | Elsewhere in Asia, the free fall of the past few days appeared to have ended. Japan was an exception, where stocks were off by 4 percent. |
| Markets around the world have been jolted in recent days by concerns about China’s ability to continue as a powerful engine of global economic growth. That has added to worries about the potential impact of higher interest rates in the United States, if the Federal Reserve sticks with its stated intention to soon raise its benchmark rate. | Markets around the world have been jolted in recent days by concerns about China’s ability to continue as a powerful engine of global economic growth. That has added to worries about the potential impact of higher interest rates in the United States, if the Federal Reserve sticks with its stated intention to soon raise its benchmark rate. |
| The sell-off had weighed heavily on commodities and regional currencies, pushing the prices of many to their lowest levels since the financial crisis. But on Tuesday, at least, futures contracts for American and European benchmark oil prices rose sharply. | The sell-off had weighed heavily on commodities and regional currencies, pushing the prices of many to their lowest levels since the financial crisis. But on Tuesday, at least, futures contracts for American and European benchmark oil prices rose sharply. |
| Many Asian currencies rose against the dollar for the first time in days. The yen, a regional haven currency, slipped against the dollar after a four-day rally. In Europe, the euro was down slightly against the dollar. | Many Asian currencies rose against the dollar for the first time in days. The yen, a regional haven currency, slipped against the dollar after a four-day rally. In Europe, the euro was down slightly against the dollar. |
| Even if they continue to bounce back, stocks have considerable ground to regain. In the United States, for example, by the time Monday’s roller-coaster ride had ended, the benchmark Standard & Poor’s 500 was down 3.9 percent. That left the index off 11 percent from its May high, called a “correction” in market parlance, its first since 2011. | Even if they continue to bounce back, stocks have considerable ground to regain. In the United States, for example, by the time Monday’s roller-coaster ride had ended, the benchmark Standard & Poor’s 500 was down 3.9 percent. That left the index off 11 percent from its May high, called a “correction” in market parlance, its first since 2011. |
| Beyond the questions about what exactly caused Monday’s moves, the recent market turmoil has now led many investors to turn their focus to the government officials who have become the most important players in the market since the financial crisis. | Beyond the questions about what exactly caused Monday’s moves, the recent market turmoil has now led many investors to turn their focus to the government officials who have become the most important players in the market since the financial crisis. |
| The biggest questions involve the health of China’s economy, and the capacity of the country’s leaders to manage its slowdown. On Tuesday, China’s prime minister, Li Keqiang, said that despite the market turbulence, the economy remained sound. | The biggest questions involve the health of China’s economy, and the capacity of the country’s leaders to manage its slowdown. On Tuesday, China’s prime minister, Li Keqiang, said that despite the market turbulence, the economy remained sound. |
| But after the further fall in Chinese stock markets, China’s central bank late on Tuesday announced cuts to interest rates as well as reserve rate requirements for banks. It was the fifth rate cut since November. | But after the further fall in Chinese stock markets, China’s central bank late on Tuesday announced cuts to interest rates as well as reserve rate requirements for banks. It was the fifth rate cut since November. |
| The move brought interest rates down by 0.25 of a percentage point, lowering the one-year lending rate to 4.6 percent, and reduced the reserve rate requirement by 0.5 of a percentage point. | The move brought interest rates down by 0.25 of a percentage point, lowering the one-year lending rate to 4.6 percent, and reduced the reserve rate requirement by 0.5 of a percentage point. |
| The central bank, called the People’s Bank of China, said the cuts would “further lower the costs of capital for businesses.” | The central bank, called the People’s Bank of China, said the cuts would “further lower the costs of capital for businesses.” |
| “Currently, there are persisting downward pressures on the country’s economic growth,” the bank said in an explanation that accompanied the announcement. “There has also been quite large volatility in global capital markets recently, and monetary policy tools need to be applied more flexibly.” | “Currently, there are persisting downward pressures on the country’s economic growth,” the bank said in an explanation that accompanied the announcement. “There has also been quite large volatility in global capital markets recently, and monetary policy tools need to be applied more flexibly.” |
| The central bank also removed the upper limit on interest rates for fixed-term deposits of more than one year. With inflation in China generally low, the central bank said the time was ripe for such steps. | The central bank also removed the upper limit on interest rates for fixed-term deposits of more than one year. With inflation in China generally low, the central bank said the time was ripe for such steps. |
| Beyond China, there is also a growing debate among market participants about whether the Federal Reserve will still follow through with plans to push interest rates higher, an action that was expected to begin in September. The market turmoil has led some, including Lawrence H. Summers, a former chief economic adviser to President Obama, to call for the central bank to reconsider those plans. | Beyond China, there is also a growing debate among market participants about whether the Federal Reserve will still follow through with plans to push interest rates higher, an action that was expected to begin in September. The market turmoil has led some, including Lawrence H. Summers, a former chief economic adviser to President Obama, to call for the central bank to reconsider those plans. |
| The debates in both China and the United States have often turned to more worrying questions about whether the levers that central bankers use to influence the markets are losing their power after years of extensive intervention. | The debates in both China and the United States have often turned to more worrying questions about whether the levers that central bankers use to influence the markets are losing their power after years of extensive intervention. |
| With all the hand-wringing, however, many investment advisers have been urging clients to ignore the recent swings. | With all the hand-wringing, however, many investment advisers have been urging clients to ignore the recent swings. |
| And although a number of American companies stand to be hurt by any weakness in China, recent data has suggested that the economy in the United States is continuing to gain strength. | And although a number of American companies stand to be hurt by any weakness in China, recent data has suggested that the economy in the United States is continuing to gain strength. |
| Even setting aside the problems in China, many analysts have said that high-flying American stocks were due for a pause after the steady climb that has characterized the United States stock market over the last four years. | Even setting aside the problems in China, many analysts have said that high-flying American stocks were due for a pause after the steady climb that has characterized the United States stock market over the last four years. |
| The slump in China’s stock market has come amid conflicting signals from Beijing. | The slump in China’s stock market has come amid conflicting signals from Beijing. |
| After a tremendous rally fizzled in June, the Chinese government resorted to exceptional measures to try to prop up share prices, including ordering state agencies to buy shares and banning large shareholders from selling. Those measures now appear to have failed. | After a tremendous rally fizzled in June, the Chinese government resorted to exceptional measures to try to prop up share prices, including ordering state agencies to buy shares and banning large shareholders from selling. Those measures now appear to have failed. |
| In an apparent reflection of policy-making dissonance in Beijing, China’s state-controlled financial news outlets gave voice to a debate about future state intervention in the markets. | In an apparent reflection of policy-making dissonance in Beijing, China’s state-controlled financial news outlets gave voice to a debate about future state intervention in the markets. |
| “The slump in the stock markets is destroying what remains of investor confidence, and this problem is profoundly serious,” said a front-page commentary on Tuesday in the official Securities Daily, defending interventionist policies. | “The slump in the stock markets is destroying what remains of investor confidence, and this problem is profoundly serious,” said a front-page commentary on Tuesday in the official Securities Daily, defending interventionist policies. |
| However, a rival commentary in another official news outlet, The Economic Information Daily, said that it was time for the government to step back from shoring up the stock market. | However, a rival commentary in another official news outlet, The Economic Information Daily, said that it was time for the government to step back from shoring up the stock market. |
| “The domestic policy focus should be on steadily retreating from stock market bailout policies,” the front-page commentary said. “Government bailouts are meant to avert financial risks, not to prop up stock prices.” | “The domestic policy focus should be on steadily retreating from stock market bailout policies,” the front-page commentary said. “Government bailouts are meant to avert financial risks, not to prop up stock prices.” |