Asian shares wobble as China rate cut fails to calm nerves

China’s key share indexes moved higher several times during the day only to be slapped back by waves of selling, reflecting investors’ views that much more aggressive support is needed from the government and the central bank.

European markets were expected to open lower, with futures on the euro zone’s blue-chip Euro STOXX index STXEc1 down by 1.6 percent.

Germany’s DAX futures FDXc1 fell 1.7 percent, Britain’s FTSE 100 futures FFIc1 retreated 1.3 percent and France’s CAC futures FCEc1 dropped 1.2 percent.

Following a near 20 percent plunge in stock prices in three days, the People’s Bank of China cut interest rates late on Tuesday and lowered the amount of reserves that banks must hold in a much-anticipated move that some economists said was long overdue.

While the double-barrelled policy move was initially cheered by markets around the world, the relief didn’t last long as investors quickly resumed their focus on the deteriorating outlook for China and its impact on the global economy.

“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.”

After yet another rollercoaster day, China’s CSI300 index .CSI300 ended down 0.6 percent, while the Shanghai Composite Index .SSEC fell 1.3 percent to fresh eight-month lows.

Both had been up 3 percent at one point.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.2 percent and remained just shy of a three-year low hit in the previous session.

Japan’s Nikkei .N225 was among the few bright spots, rising 3.2 percent on bargain hunting after six days of declines, while Australia rose 0.7 percent.

Companies such as mining giant BHP Billiton (BLT.L) have softened expectations of demand growth from China while countries most exposed to China’s economy, such as Indonesia, have dialed down their growth forecasts for 2015 in recent days.

Mark Mobius, executive chairman of Templeton Emerging Markets Group at Franklin Templeton, told Reuters that fund managers are being forced to unwind their holdings because of a “loss of liquidity” and high volatility.

The CBOE Market Volatility Index .VIX was still elevated at 36, indicating significant uncertainty, even though the “fear index” was below the previous day’s peak of 53.3, which was the highest since January 2009.

In a sign of how fearful investors have become of risky assets, a rally on Wall Street fueled by China’s policy easing evaporated on Tuesday and stocks ended with deep losses.

U.S. stock index futures ESc1 fell in early Asian trade before edging back up 0.5 percent.

Fixed income markets were active with investors rushing for safety in government debt and cash.

“Some parts of the Asian bond markets have become quite illiquid and investors are only buying high-quality paper amid this selloff,” said Hayden Briscoe, fixed-income director at AllianceBernstein in Hong Kong and part of a team that manages $250 billion in assets globally.

In currencies, the dollar has also broadly lost steam as traders unwound massive carry trade bets built up in recent years based on higher yielding assets and instead flocked to safe-haven currencies such as euro and yen.

China’s downturn and global market turmoil have also created fresh uncertainty over whether the U.S. Federal Reserve will begin raising interest rates this year.

The euro was $1.1565, little changed from late U.S. trade, but more than a full cent above Tuesday’s low of $1.1396.

The dollar was at 119.46, failing to maintain its brief foray above the 120 mark.

Commodity prices hovered just above multi-year lows hit earlier in the week, but concerns that softer demand from China would worsen existing global supply gluts kept a lid on them.

A 19-commodity Thomson Reuters/Core Commodity CRB Index .TRJCRB was just holding above lows not seen since 2003.

Brent crude futures LCOc1 last traded at $43.46 per barrel, about a dollar above 6 1/2-year low of $42.23 on Monday.

Copper CMCU3, often considered a proxy for global economic activity because of the metal’s extensive use, fell 1.2 percent to $5,002 per tonne.