European markets joined Asia on a roller-coaster session Wednesday, as China's interest rate cut showed no sign of ending a crisis fuelled by fears over stalling growth in the world's number-two economy.
Frazzled investors sent Europe's top indexes falling by more than one percent in opening trade after a choppy session on Asian bourses, and analysts predicted more turbulence ahead.
China's central bank reduced interest rates and slashed the amount of money banks need to hold in reserve on Tuesday -- its second such double move in two months -- in a bid to stoke growth.
The measures are not only aimed at boosting boost cash flow in China, but also to revive confidence that Beijing can steer the economy away from a hard landing and keep global growth on course.
The cuts initially fuelled a rebound in Europe but optimism fizzled by the end of US trading, and on Wednesday Asian markets see-sawed in nervous trade.
"The struggle between gains and losses suggests that the market doesn't really know what to make of the policy move yet," Bernard Aw, a strategist at IG Asia, told Bloomberg News.
China's benchmark stock index fell 1.27 percent, or 37.68 points, to 2,927.29, after a day that saw it veer wildly from between losses and gains of around four percent.
Other Asian shares were mixed, with Tokyo surging 3.20 percent, Seoul closing up 2.57 percent and Sydney adding 0.69 percent, while Hong Kong followed Shanghai down to close 1.52 percent lower.
"The equity market roller-coaster continues," said TrustNet analyst Tony Cross as Frankfurt, Paris and London all lost ground after Tuesday's strong gains.
"It's Wall Street's slump... that appears to be setting the pace for the UK market and, as is often the way after these excessive moves, this volatility appears likely to be with us for some time yet."
- 'Full-blown crash' -
Chinese stocks have lost more than 40 percent of their value since a year-long, debt-fuelled rally collapsed in June, prompting Beijing to unleash unprecedented market support measures, including using state-backed vehicles to buy up shares.
While the slump in Shanghai may have a limited impact on the broader economy -- worth some 13 percent of world output -- it reflects investors' views that the sky-high valuations of quoted companies are not justified.
Some analysts see Beijing's handling of the market slump as a further litmus test of the government's ability to guide the economy to a more market-oriented model after the shock devaluation of the yuan two weeks ago.
"If problems on China's financial markets and real economy deepen, and the authorities fail to contain the situation, a full-blown financial and economic crash in China could ensue," said Christophe Donay, chief strategist at Pictet Wealth Management.
"This is currently the biggest risk for the global economy and financial markets."
China's central bank on Tuesday warned that the "economic growth rate remains under pressure", adding the cuts were meant in part to "support the real economy to continue to develop healthily".
The People's Bank of China (PBoC) cut its benchmark lending and deposit interest rates by 0.25 percentage points each and its reserve requirement ratio by 0.50 percentage points.
The bank has now cut interest rates five times since November in a bid to spur the slowing economy as concerns mount it may miss its seven percent growth target for the year.
But international investors said more would need to be done to fully reassure markets, especially as the US Federal Reserve is expected to raise interest rates for the first time in nearly a decade by the end of 2015.
The head of the PBOC's research unit Tuesday blamed the US for the market volatility, saying expectations for a US rate rise in September had been the "trigger" for the wild swings in world markets, Xinhua reported.
"A circuit-breaker is needed to dispel excessive pessimism and restore confidence," Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong, told Bloomberg News.
"Further support measures in the coming weeks and months will be needed."
-- Bloomberg News contributed to this report -- AFP