European and US shares rebounded on bargain-hunting Tuesday as China cut rates after fears of a slowdown in the world's second-biggest economy sparked a "Black Monday" rout across global markets.
A slump in China had sparked pandemonium on the first trading day of the week, wiping about $2.7 trillion off global equities as bourses from London to Buenos Aires were snared in a precipitous plunge.
Shanghai shares dived 7.63 percent on Tuesday, extending their steepest drop in almost two decades, wiping out the year's gains and closing below the key 3,000 point mark for the first time in 2015.
Markets elsewhere in Asia were mixed.
But European equities -- which suffered their worst slump Monday since the 2008 financial crisis -- surged on bargain-hunting and the Chinese central bank's move to slash interest rates for the fifth time in nine months.
Wall Street shares also jumped in opening trade with the Dow Jones Industrial Average up 2.22 percent, the broad-based S&P 500 gaining 2.16 percent, and the tech-rich Nasdaq Composite Index rising 3.03 percent -- ending a five-day streak of losses.
- Fragile economies -
"Monday's sell-off may have been overdone but the underlying fears remain. The Chinese economy is slowing and the more we see its markets collapse, the more concerned investors are going to become," said Craig Erlam at trading firm Oanda.
"We have seen before that these large crashes can either spark or act as a warning of a global recession and given how fragile many economies still are, it would be naive to think the same couldn’t happen again."
Slowing growth in China has long kept investors on edge but the shock devaluation of the yuan two weeks ago, following a string of weak economic data, spooked the markets.
Chinese Premier Li Keqiang insisted there was no basis for the yuan currency to weaken further and said the exchange rate would be maintained at a "basically stable" level, state media reported.
China is the world's top trading nation and a key driver of global growth, so signs its economy is faltering -- particularly when the US Federal Reserve is expected to raise interest rates for the first time in almost a decade -- have fuelled world recession fears.
Tokyo ended a see-saw session down nearly 4.0 percent, in its sixth straight day of losses, but Hong Kong, Sydney and Seoul eked out gains.
- 'Turnaround Tuesday' -
In Europe, Frankfurt and Paris surged by more than 4.5 percent, while London gained 2,8 percent in mid-afternoon trading.
"Turnaround Tuesday continued... with nervy investors pouring back into the European indices as they try and regain the ground that was lost on that nightmarish Monday," said Spreadex analyst Connor Campbell
The People's Bank of China took action Tuesday reducing lending and deposit interest rates by 0.25 percentage points each and its reserve requirement ratio by 0.50 percentage points.
The moves take effect Wednesday, and follow similar tandem cuts in late June.
The central bank has now cut benchmark interest rates five times since November as authorities try to head off a too sharp deceleration in economic growth.
"Investors panicked yesterday, concerned about of the lack of reaction, and this (action by the Chinese central bank) might help," Peter Dixon, a global economist at Commerzbank AG in London, told Bloomberg News.
"Markets are beginning to realise this is a Chinese problem, not a European one. These are specific issues which refer to fundamentals in other markets and do not reflect the situation in Europe."
French President Francois Hollande said he trusted that "Chinese authorities will overcome this stock market crisis."
But British finance minister George Osborne warned that the global economy could not be immune to China's woes.
"These dramatic movements in recent days are telling us there are still lots of risks out there in the global economy and there are particular concerns about what's going on in China.....it means we're not immune to what goes on in the world," he said.
In London foreign exchange deals, the dollar traded 119.65 yen, up from a seven-month low of 116.18 yen struck in New York on Monday, but weaker than 122.06 yen seen in US trading on Friday.
The yen has strengthened this month as investors tend to buy the unit in times of uncertainty.
The euro meanwhile was firmer at $1.1466 and 137.66 yen.
Commodity prices recovered, although oil remained under pressure as dealers expect a global supply glut to continue for the coming years.
US benchmark West Texas Intermediate (WTI) for October delivery rose $1.13 to $39.37 a barrel while Brent North Sea climbed $1.32 in London to $44.01.
