Asian stocks bounced back yesterday, thanks to a late recovery in Chinese stockmarkets after a sharp fall in early trading left everyone staring a very worrying abyss.
Chinese markets pulled back in late trading after continuing Monday's sharp sell-off with another multi-billion dollar slide yesterday morning. That saw the main market indexes down more than seven per cent at one stage.
But rumours of government moves to stabilise the situation saw a late rise and the indexes finished in positive territory.
The Shanghai Composite Index, which fell 7.25 per cent in the morning, recovered in the afternoon to end up 2.6 per cent at 3,767.1.
The Shenzhen Composite Index, which tracks the smaller of China's two stock exchanges, ended 2.5 per cent higher at 1,066.05 and the CSI 300 Index rose 3.5 per cent after falling by 7.5 per cent in the morning.
Total losses in value hit more than $US400 billion by the close,after it rose above half a trillion US dollars in early trading.
The CSI 300 is now down 13 per cent from its May 29 peak after the government raised a tax on securities trading to try and prick the market bubble. The fall in the CSI 300 (which tracks the 300 A shares on both exchanges) was 22 per cent at one stage in the morning yesterday.
That was worrying and if it had closed as low as that last night, would have posed serious questions about the stability of sentiment on European and Asian exchanges.
Yesterday morning's slide was seemingly too much and rumours emerged in the early afternoon of government concern and possible action.
For the second day in a row the Chinese government had tried to reassure investors with more soothing in official financial media which talked about the current correction being temporary and not aimed at the wider bull market (Well, why take the action?).
Japan's Nikkei 225 Stock Average gained 0.5 per cent. Other benchmarks in the region rose, except in Australia, Indonesia, Thailand and the Philippines.
The ASX 200 Index lost 22 points to end at 6370.80.
But US markets fell on the re-emergence of fears the US Fed may have to raise interest rates later this year because the economy is recovering strongly from the slowdown at the start of the year.
Yields on US Government 10 year bonds touched 4.99% per cent overnight before settling back at 4.97%.
Commodity prices edged lower and stockmarkets were sold off by investors taking profits and worried about the growing possibility of a rate rise.
