Shanghai Composite
An estimated $5tn has been wiped off equity markets since the Chinese government started to devalue the YuanReuters

American stock markets jumped at the open after the Chinese government announced measures to encourage investments in Shanghai Composite companies after the index slumped heavily for two days.

The Dow Jones Industrial average jumped more than 330 points and the S&P 500 rose by 1.7% just minutes after opening on Tuesday 25 August. JPMorgan Chase and Apple took the lead when Wall Street stocks jumped and corrected the majority of the damaged made on Monday 24 August, when the Dow Jones even briefly dropped by more than 1,000 points. It closed 588 points lower on Monday than it started the week.

In one of the biggest global sell-offs in years, about $1tn (£0.6tn) worth of equities were written off on Black Monday. In a response that has left analysts baffled, stock markets worldwide plunged on Monday, only to rally the day after. The positive response can largely be attributed to the fact that the People's Bank of China has cut the requirement reserve ratio for investors by 0.5 percentage points, in the seventh cut since November 2014.

The cut means the ratio will be at 18%, down from 18.5%. It was announced to encourage investments on the falling Shanghai Composite.

The Bank also announced it is cutting the one year lending interest rates by 0.25 percentage points, from 4.85% to 4.6%, as well as the deposit rate, which has been cut to 1.75% from 2%.Sanctions from the People's Bank of China were largely expected by analysts after the Shanghai Composite suffered a loss of more than 8% on 24 August dubbed Black Monday.

When the Chinese stock market bubble burst in June, after making historical gains in 2015, the country's government has introduced aggressive measures to maintain the surge of the market.