SHANGHAI'S key stock index declined by noon break as investors took their cues from tumbling overseas markets to remain cautious about the economic outlook.

The Shanghai Composite Index slumped 1.44 percent to 2352.52 points, paring some of yesterday's gains, which were the biggest in six weeks. Turnover stood at 32.98 billion yuan (US$ 5.18 billion).

Caution dominated investment sentiment in Europe and the US yesterday, after the market had been buoyed on cheaper dollar swap lines agreed by several major central banks to inject more liquidity into the global financial system.

STOXX Europe 600 snapped out of its four-day rally, sliding 0.7 percent, while the Dow Jones Industrial Average fell 0.21 percent, putting an end to the three-day rebound.

China's central bank staged the first reserve requirement ratio cuts for banks since 2008 on Wednesday to avoid a credit crunch, and further economic slowdown.

Lenders declined in the morning session on the Shanghai Stock Exchange on speculation that the recent fine-tuning of monetary policy won't lead to a major policy direction change in the foreseeable future.

Industrial and Commercial Bank of China lost 1.87 percent to 4.2 yuan. Agricultural Bank of China retreated 1.54 percent to 2.56 yuan.

Resource stocks lead the sell-off after yesterday's surge as China's purchasing managers index for November had retreated to 49, down from last month's 50.4, indicating contracting industrial activities.

Jiangxi Copper Co, the country's largest producer of the metal, tumbled 2.73 percent to 25.64 yuan. Yanzhou Coal Mining dropped 3.01 percent to 25.45 yuan.

Source:shanghaidaily