China’s stock markets continue their roller coaster ride as shares turned upwards again Wednesday after plummeting 7.63 percent Monday near 9 percent to settle at an eight-month low of 2,965.1.
The move up was a reaction to actions initiated by the People's Bank of China (PBOC) which lowered interest rates and the reserve requirement ratio (RRR) by 25 basis points. In addition, according to one of China’s security regulators, an increase in transaction fees on stock index futures trading will also be introduced.
Analysts are divided as to whether these moves will succeed in pulling the world’s second largest economy out of the situation it now finds itself.
Pu Yonghao, partner and CIO at Fountainhead Partners told reporters, "Clearly a cut [in] the interest rate and RRR is helpful, but people still overly concerned about the economy, this relaxation in monetary policy may be coming in a bit too late because the sentiment is worsening."
US Stock Markets Down
U.S. stock markets reacted overnight to the announcements with the blue-chip Dow Jones Industrial Average and S&P 500 ending their sessions about 1.3 percent lower after rallying near 3 percent earlier. This marked their biggest downside reversal since October 2008. The S&P 500 remained in correction territory.
Crude oil futures edged up slightly on Wednesday, close to 6-1/2 year lows with Brent trading 29 cents higher at $43.50 a barrel and U.S. October crude up 29 cents at $39.60 a barrel.
The sudden increase may have been a result of China's rate cut stopping oil prices from finding a new low. But additional price increases are not expected in the near future.
According to Daniel Ang, an investment analyst at Phillip Futures Pte Ltd, “…with a new day, new challenges await. We would likely be seeing US crude inventories pushing prices down … due to slowing refinery activities."