• A currency trader covers his face with his hands at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut its key interest rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon)

    A currency trader covers his face with his hands at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut ... its key interest rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon) (The Associated Press)

  • Currency traders watch monitors at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut its key interest rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon)

    Currency traders watch monitors at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut its key interest ... rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon) (The Associated Press)

  • A currency trader eats lunch at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut its key interest rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon)

    A currency trader eats lunch at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday, Aug. 26, 2015. Shares were mostly lower in Asia on Wednesday, after a move by China to cut its key interest ... rate failed to spark a sustained rally on Wall Street. Investors looked set for another white-knuckle day as Chinese, Hong Kong and Japan shares bobbled in and out of negative territory. (AP Photo/Ahn Young-joon) (The Associated Press)

Asian stocks rise after rocky start following China rate cut; Shanghai index rebounds

Energy Associated Press

Asian stocks rose Wednesday after a rocky start following Beijing's decision to cut a key interest rate to help stabilize gyrating financial markets and free up more funding to counter short liquidity.

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By early afternoon, China's benchmark Shanghai Composite Index — the source of much angst during these days of volatility — had climbed 2.6 percent to 3,041.03, on track for its first gain in five days.

Asian markets bobbed in and out of negative territory in early trading but appeared to regain buying momentum by early afternoon. Japan's main Nikkei 225 stock index advanced 3.4 percent to 18,414.20, while Hong Kong's Hang Seng index was up 0.6 percent at 21,534.25.

Elsewhere in Asia, Australian shares gained 0.7 percent to 5,170.90 and South Korea's Kospi rose 2.4 percent to 1,891.63. Shares in rose in Taiwan and most of Southeast Asia but fell in New Zealand and Indonesia.

"A certain calm has descended on Asian markets today, allowing traders to catch a much-needed breath," Chris Weston, chief market strategist at IG, said in a market note. But he added, "It still feels as though volatility can break out at any time."

Markets have been gyrating for weeks as fears snowballed over the potential impact of slowing growth in China, the world's second-largest economy and the driver of much of global growth over the past decade.

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Plunging share prices in China, and the apparent inability of regulators there to stabilize the markets, have spooked investors already fretting over when the U.S. Federal Reserve will raise interest rates.

The slow start in Asia followed a last-minute sell-off overnight that dragged the Dow Jones industrial average down 204.91 points, or 1.3 percent, to close at 15,666.44. That extended 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 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.

Global markets were lifted by the news out of Beijing, with European shares climbing sharply higher, and for a while it looked as if U.S. stocks would follow suit and the global sell-off might stop. By day's end, however, the Standard & Poor's 500 index was down 25.60 points, or 1.4 percent, to 1,867.61 while the Nasdaq composite lost 19.76 points, or 0.4 percent, to 4,506.49.

The People's Bank of China acted after the Shanghai stock index slumped 7.6 percent on Tuesday, on top of an 8.5 percent loss on Monday.

China's slowdown is crimping demand for oil and other commodities, a ripple effect that already is slowing exports and other business activity across Asia.

Beyond China, traders are waiting for clarity from the Federal Reserve, which 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. The Fed isn't expected to deliver a policy update until it wraps up a meeting of policymakers in mid-September.

In other trading, U.S. crude oil rose 29 cents to $39.60 a barrel in electronic trading on the New York Mercantile Exchange. It rose $1.07, or 2.8 percent, to $39.31 on Tuesday. Brent crude oil, which is used to price international trading, also gained 29 cents a barrel, to $43.50.

The dollar rose to 119.60 yen versus 118.66 yen late Wednesday. The euro slipped to $1.1481 from $1.1524.

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AP Business Writer Alex Veiga in Los Angeles contributed.