Global markets were pummeled on Monday, with Chinese shares falling 8 percent, prompting investor calls for remedial action from authorities that grew louder overnight after the Shanghai Composite Index slumped a further 8 percent.
Economists said Tuesday's response - a 25 basis point cut in key rates and 50 bps off the reserve requirement rate for large commercial banks - sent a clear signal that Beijing, which has stepped in several times this year to keep China's high-powered growth on track, was still willing to intervene.
But as asset prices eased back following the initial euphoria, some questioned whether the measures would help.
"Investors have been waiting for them to act and they have," said Kallum Pickering, senior economist at Berenberg.
"Is this sufficient? It might not be but it does set a precedent that they are engaged and looking to prevent any further declines."
As the previous day's rush for safety reversed, German Bund yields also rose with the 10-year benchmark up 11 basis points at 0.69 percent. Yields on safe-haven U.S. Treasuries were also up.
By 1200 GMT, Wall Street was indicated up 3.6 percent, the pan-European FTSEurofirst 300 index gained 4.4 percent and MSCI's benchmark emerging stocks index rose 2.4 percent - its biggest jump in two years after seven days of back-to-back falls.The PBOC (central bank) is doing what it has to do but it is very likely it is not enough so more will have to be done," said Wei Yao, China economist for Societe Generale in Paris.
'A BIT OF PANIC'?
The stock market gains in Europe, which recouped the bulk of the 5 percent-plus lost the previous day when around 450 billion euros ($520 billion) was wiped off the FTSEurofirst 300's value, were also supported by takeover news.
Swiss agricultural chemicals maker Syngenta bounced 9.0 percent after a source said Monsanto had sweetened a takeover bid, and British insurer RSA gained 4.7 percent after an offer from Zurich Insurance.
With China the world's biggest consumer of commodities, crude and metals markets also responded, albeit relatively modestly, to Beijing's move.
U.S. crude futures traded at $39.40 per barrel, up 3.1 percent on the day, while Brent rose 2.9 percent to $43.91.
But global oversupply and worries over the severity of the slowdown in China kept oil prices near the 6-1/2-year lows they fell to on Monday, when the market slumped 6 percent.
Copper, often considered a proxy for global economic activity, rose 1.65 percent to $5,038 a tonne.
In China where recent market volatility has been at its most extreme, the central bank's policy move - coming on the heels of a shock devaluation of the yuan two weeks ago - drew a guarded reaction.
"This is a big-bang move... Frankly (it) shows a bit of panic in my mind," said Andrew Polk, resident economist at the Conference Board in Beijing.
(Additional reporting by Lionel Laurent, Marc Jones and China Economics; writing by John Stonestreet; editing; by Anna Willard)