Australian shares withstood a further meltdown in China yesterday, with a surge in banks and consumer staples leading the local market to its best one-day advance in four years as the US market showed tentative signs that a recent -correction was ending.
The dramatic reversal across local equities came as some of the nation's most senior business leaders urged investors to look beyond the volatility ravaging global stockmarkets, labelling it a short-term correction and talking up the -Australian economy.
China last night moved to inject confidence into the nation's financial system as the central bank there cut interest rates by one-quarter of a percentage point and reduced the bank reserve requirement ratio by half a percentage point. China also did away with its ceiling on most bank deposits.
The rate cut is the fifth by the Chinese central bank since   November, while the reserve-requirement cut for all banks is the third this year. The move, coming in after-hours trade, spurred an immediate rally in European shares. 
Before the rate cut, China's Shanghai Composite dived another 7.6 per cent yesterday, bringing its fall since mid-  July to 43 per cent, as Chinese officials refrained from providing any additional monetary stimulus or market intervention. The smaller Shenzhen composite fell 7.2 per cent.
But Australia finally bucked the sell-off in its biggest trading partner as a number of bellwether US companies including Apple, GE and Caterpillar bounced more than 10 per cent intraday, signalling a potential bottom in the US S&P 500 index after a 12.5 per cent fall in the past six weeks.
Despite a 4.2 per cent fall in overnight share price index -futures, Australia's benchmark S&P/ASX 200 rose 2.7 per cent to 5137.3 yesterday, its biggest one-day rise since   October 2011.
Westpac jumped 4.9 per cent, Woolworths climbed 5.3 per cent and Macquarie surged 5.9 per cent.
European stocks climbed sharply in early trade last night, while US stock futures surged.
Germany's DAX rose 2.6 per cent and Britain's FTSE 100 was 2.7 per cent higher on opening.
This was in sharp contrast to Monday night, when the Dow Jones plunged more than 1000 points on open, before -closing 3.6 per cent lower.
"The fundamentals are good and they are a lot better than they were a year ago, than they were five years ago, (and) then that's something to build on," Qantas chief executive Alan Joyce said at a Male Champions of Change event in Sydney.
"Market corrections have taken place significantly over time and they haven't had a fundamental impact. The 1987 correction didn't have a fundamental impact on the economy.
"These things can happen and not have a detrimental GFC-type effect, which is a fundamentally different type of crisis. That was a crisis and was different to what we see today." Commonwealth Bank chief Ian Narev said investors should take a "long- term view" of markets over a number of years, rather than focus on "day-to-day developments". He said the bank's $9.1 billion annual profit, released this month, highlighted the economy's "really strong foundations", but said volatility from global developments in China, Europe and the US was weighing on business confidence.
"Undoubtedly these things can impact confidence," he said. "(But) one thing we've all got to get more comfortable with in these sorts of markets is they are more volatile. We're coming out of a period where interest rates have been at a sustainably low rate, we've had changes to trading patterns, changes in the global economy. We've got to realise the levels of fluctuations we get are just a lot bigger than we're used to in the past." The Australian stockmarket has fallen as much as 13.5 per cent this month as banks raised equity capital, corporate earnings reports disappointed, Wall Street peaked and China's market tumbled.
The dollar bounced from US71.5c to US72.33c, and 10-year government bond yields rose 10 basis points to 2.59 per cent as demand for safe-haven investments moderated. However, market volatility remained extreme, with the S&P/ASX 200 VIX index - a measure of implied volatility - rising to 31 per cent, versus its long-term -average near 21 per cent.
Mike Smith, chief executive of ANZ Bank, agreed that the fundamentals in Australia were "still pretty sound" and China's stockmarket rout was a "correction that had to happen" after its massive run-up earlier in the year.
"Looking at the medium and long term, China has still got huge potential and should we be -worried about it? I don't think so," he said.
Mr Smith, chief of Australia's most exposed bank to Asia, added that Chinese officials had "a lot of levers to pull" to support the world's second-biggest economy, which analysts fear is slowing more quickly than expected.
"I think you have to think who's being affected here. If it's mainly people outside China, why are they going to worry too much?" he said.
"I'm not too worried, they know what they're doing. These ideas that they seem to have lost the plot I think are probably by people who have lost the plot." Goldman Sachs Australia chief Simon Rothery said the recent sell-off in global markets had been a "healthy correction" and that slower growth in Asia would make -Australia's stockmarket relatively appealing.
"Certainly, there will be slower growth moving forward in China but it's still going to be one of the fastest-growing economies in the world," Mr Rothery said.
"If anything, our market should benefit regionally because the Australian market becomes very defensive and we've already seen that (yesterday) morning, a lot of offshore money coming into our market.
"We do see value in the market. On any measurement our market is actually fair value at the -moment." Even so, Amcor chief executive Ron Delia said there were signs of a slowing Chinese economy with the packaging company's sales growth easing to "the low single digits" over the past six months.
"In the second half of the year growth was below the prior period. There is no question things have slowed down in China," Mr Delia said after the group reported an annual net profit of $680.3 million as revenue from continuing operations fell 3.5 per cent to $9.62bn.
But he added: "China is a long- term opportunity for us. Emerging markets in general is a long-term game." Mr Joyce said Australia had "huge opportunities", citing the lower dollar, high inbound tourism and the strong US economy.
Despite the increasing volatility, fund managers suggested the worst could be past for local shares. "The technical price target on the correction in the (S&P/ASX 200) index has basically been achieved now," said Nader -Naeimi, who helps manage about $156bn as head of dynamic asset allocation at AMP Capital.CRITERION P28