China stocks bounced between gains and losses on Wednesday as investors reacted to a new round of stimulus measures from the central government.
After spending much of the morning in negative territory, the benchmark Shanghai Composite was 0.8% higher by mid-day. Trading was more volatile on China’s smaller Shenzhen Composite, which shed as much as 3% before mounting a recovery.
China launched new stimulus measures after the market close on Tuesday, cutting key interest rates in an effort to support the economy. The central bank also said it would require large banks to keep less cash on reserve starting in early September, a move that should boost activity by making it easier for banks to lend money.
The move follows dramatic stock declines suffered earlier in the week. The Shanghai Composite lost more than 15% of its value on Monday and Tuesday, extending a longer-term drop that has wiped out all gains made this year.
In Japan, the Nikkei was trading 0.4% higher. Australia’s ASX All Ordinaries was in negative territory, but Seoul’s KOSPI Composite gained roughly 1%.
Turbulence in Asia comes after a wild Tuesday for U.S. stocks. After the Dow surged 442-points in early trading, gains vanished by the end of the session, the latest sign of investors anxiety.
Three factors continue to weigh on markets:
1. Concerns that China’s economy is slowing faster than analysts had anticipated.
2. Uncertainty over when the U.S. Federal Reserve will raise its benchmark interest rate.
3. The effect of exceedingly cheap oil — crude is now trading below $40, its lowest point in more than six years.
