China's key indexes close down for fifth session

China’s market gyrated throughout Wednesday with key indexes ending down for a fifth straight session after swinging more than 3 percent in both directions in extreme volatility that sent European shares down as concerns about China’s economy persisted.

A sharp mid-session rebound in China following a deep correction in early morning invited waves of selling in the late afternoon, underscoring fragile confidence and deep doubt over whether the central bank's overnight cuts in interest rates and reserve ratios could stabilize the economy.

The CSI300 blue-chip index of the largest listed companies in Shanghai and Shenzhen ended down 0.6 percent, to 3,025.69, while the Shanghai Composite Index lost 1.3 percent, to 2,927.29 points.

Both indexes hit fresh eight-month lows, and have lost over 20 percent in just five trading sessions.

The People's Bank of China late Tuesday cut interest rates and lowered the amount of reserves banks must hold for the second time in two months, in an apparent move to aid the economy and the slumping stock market.

The move stimulated prices in banking and real estate stocks, sectors that investors believe will benefit the most from additional liquidity.

"The seemingly endless issues confronting global markets remind us too much of the good old arcade game of Whack-A-Mole. Even as one problem retreats, another one seems to be lurking around and ready to spring up," Wellian Wiranto, an economist at Singapore's OCBC bank, said in a research note.

"For one, renewed volatility in China and oil’s price slump have resurfaced to demand attention. Meanwhile, though the potential for Fed’s (interest rate) lift-off has receded somewhat, it remains a matter of time before it pops up again."

In Hong Kong, shares surrendered early gains and ended Wednesday lower after excitement over China’s rate cuts cooled and sentiment was soured by a renewed sell-off in Chinese markets in the afternoon.

Hong Kong’s Hang Seng index fell 1.5 percent, to 21,080.39, while the China Enterprises Index lost 0.9 percent, to 9,427.93 points.

Japanese stocks rebounded on Wednesday, turning around a six-day losing streak as bargain hunters snapped up major stocks such as banks and big exporters.

The Nikkei share average rose 3.2 percent to 18,376.83, posting its biggest daily gain since October 31.

The benchmark index had fallen 13.6 percent, or 2,813 points, in the previous six sessions through Tuesday, threatening to wipe out its gains for the year as fears of a China-led global economic slowdown drove the selling of risk assets.

But early morning volatility on Wednesday gave way to steady buying as major stocks fell to attractive prices.

The pan-European FTSEurofirst 300 index, which rose 4.3 percent on Tuesday, fell 2 percent, as did the euro zone's blue-chip Euro STOXX 50 index.

Germany's DAX weakened by 1.6 percent, leaving it some 20 percent below a record high reached in April.

The FTSEurofirst, which risks posting its biggest monthly loss since 2002, suffered its worst one-day drop since November 2008 on Monday. It rallied back on Tuesday after a Chinese interest rate cut boosted markets.

Britain's top share index fell on Wednesday, tracking declines in European and Asian markets.

The index posted its biggest one-day rise since 2011 on Tuesday after China cut interest rates to calm markets.

The relief didn't last, as investors quickly resumed their focus on the deteriorating outlook for China and its impact on the global economy.

But many investors remain worried by signs of a Chinese economic slowdown and deflationary pressures resulting from Beijing's devaluation of the yuan earlier in August.

"I think the downtrend is still intact because of the bigger picture of anemic global economic growth. Any reasonable rally on the markets will be sold into," said Berkeley Futures' associate director Richard Griffiths.

Reuters