China Stocks Fall for Second Day

BEIJING (AP) --- Chinese stocks fell further Tuesday after suffering their biggest drop in eight years the previous day while most other Asian markets declined and Europe rose.

KEEPING SCORE: The Shanghai Composite Index dropped 3.8 percent in early trading but recovered to end down 1.7 percent at 3,663.00. In Europe, Germany's DAX was up 1.4 percent at 11,211.78 and France's CAC-40 gained 1.3 percent to 4,990.14. Britain's FTSE 100 added 0.9 percent to 6,560.37 after a report showed the U.K. economy picked up speed in the second quarter.

On Wall Street, futures pointed to gains after Monday's fall. Dow and S&P 500 futures were both up 0.5 percent.

CHINA'S PLUNGE: The Shanghai index fell 8.5 percent on Monday, its biggest one-day loss since February 2007 despite a massive government intervention. Analysts blamed investor concern over slowing economic growth and said a decline appeared inevitable after a rebound driven by government measures over the past two weeks. The Shanghai index had risen nearly 150 percent starting late last year before hitting a peak in early June and falling. Chinese authorities responded with a raft of market support measures that included prohibiting stock sales by major shareholders. State-owned brokerages and pension funds have pledged to buy shares.

THE QUOTE: "With Chinese markets heading further south on Tuesday after yesterday's plunge, the question whether Beijing's intervention is working gets louder," said IG market strategist Bernard Aw in a commentary. Since only 9 percent of Chinese households actively traded shares, and a small subset of those use borrowed money, the negative wealth effect from a stock market meltdown should not be "that big a deal," Aw said. "In this vein, could the Chinese authorities be over-reacting? Could they have left the market forces alone to determine what the equilibrium level is? Or perhaps they know more intimate details than we do?"

ASIA'S DAY: Hong Kong's Hang Seng rose 0.6 percent to 24,503.94 while Tokyo's Nikkei 225 shed 0.1 percent to 20,328.89. India's Sensex declined 0.4 percent to 27,437.61. Singapore, New Zealand, Bangkok and Jakarta also retreated. Seoul's Kospi was flat at 2,039.10 and Sydney's S&P/ASX 200 dropped 0.1 percent to 5,584.70.

U.S. ECONOMY: Traders were turning attention to the U.S. Federal Reserve as they try to assess when interest rates will be raised. Expectations are split between September or December. Fed leaders meet this week but few central bank watchers expect a rate hike. Ultra-low interest rates have been a boon for stock markets for several years and the first U.S. rate hike since the 2008 financial crisis is likely to ruffle markets.

ENERGY: Benchmark U.S. crude declined 34 cents to $47.05 per barrel in electronic trading on the New York Mercantile Exchange. The contract shed 75 cents on Monday to $47.39.

CURRENCIES: The dollar rose to 123.74 yen from 123.27 yen on Monday. The euro fell to $1.1032 from $1.1087.