Wall Street set to rise on open but other markets languish

ELAINE KURTENBACH, AP Business Writer

Wall Street was expected to rise sharply on the open Wednesday, though most other global markets languished amid worries over longer-term problems with China's economy.

After a hugely volatile week, investors looked ready to plunge back in and buy U.S. stocks, with Dow futures up 1.7 percent, or 274 points, and S&P futures up 1.8 percent, or 33.45 points.

U.S. markets had failed to rebound the day before from sharp losses on Monday.

In Europe, shares were modestly lower, with Germany's DAX down 0.5 percent, Britain's FTSE 100 slipping 0.3 percent and the CAC40 in France 0.4 percent lower.

Earlier, China's own benchmark, the Shanghai Composite Index, also dropped to close 1.3 percent lower as initial euphoria faded over an interest rate cut by the central bank the day before.

The decline followed a 7.6 percent slump on Tuesday and an 8.5 percent loss the day before. But stocks in Japan, South Korea and Australia gained.

Markets have been volatile for weeks on deepening unease over the ramifications of slowing growth in China, the world's second-largest economy and the driver of much of global growth over the past decade.

The apparent inability of Chinese regulators to calm the markets has spooked investors already fretting over when the U.S. Federal Reserve will raise interest rates.

The Fed has signaled it could begin raising its key interest rate from near zero for the first time in nearly a decade as early as this year. But it is not expected to deliver a policy update until it wraps up a meeting of policymakers in mid-September.

In a last-minute sell-off Tuesday, the Dow Jones industrial dropped 1.3 percent, extending Wall Street's losing streak to six days, the longest such stretch in more than three years.

The Dow had surged more than 400 points Tuesday after China cut its interest rates for the fifth time in nine months in a renewed effort to shore up growth. The central bank also increased the amount of money available for lending by reducing the reserves banks are required to hold.

Those moves have alleviated a crippling shortage of cash available for funding, but do not address the wider problems behind a slowdown that is crimping demand for oil and other commodities, slowing exports and other business activity across Asia.

"This move may help calm the markets in the short term. But it will likely not be enough to fix China's growth problem," Credit Agricole economists Sebastien Barbe and Gary Yau wrote in a note to investors.

The bigger, more intractable problem is how to rebalance the economy away from its overreliance on investment in construction and property investments while trying to keep growth at a high level.

"Bottom line, China is not in a position to address both challenges at the same time today," they wrote.

Still, many in Asia took heart from China's moves.

Japan's Nikkei 225 stock index advanced 3.2 percent to 18,376.83, South Korea's Kospi gained 2.6 percent to 1,894.09 and Australia's S&P ASX/200 rose 0.7 percent to 5,172.80, helped by buying of resource-related shares. Shares also rose in Taiwan.

But Hong Kong's Hang Seng index fell 0.5 percent to 21,305.17, and mainland China's smaller Shenzhen Composite Index lost 3.1 percent. Markets were also lower in New Zealand and most of Southeast Asia.

In other trading, U.S. crude oil rose 39 cents to $39.70 a barrel in electronic trading on the New York Mercantile Exchange. It rose $1.07 a barrel on Tuesday.

The dollar rose to 119.87 yen versus 118.66 yen late Wednesday. The euro slipped to $1.1363 from $1.1524.

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