Chinese stocks bounced back Wednesday after their biggest decline in a decade, but stock markets elsewhere in Asia and Europe fell for a second day amid investor worries about possible slowdowns in the Chinese and U.S. economies.

China’s Shanghai Composite Index bounced back 3.9% to close at 2,881.07, rebounding from its 8.8% plunge Tuesday — its biggest drop in a decade — which triggered the global sell-off.

Chinese authorities denied rumors of a 20%t capital gains tax on stock investments — speculation that had played a role in Tuesday’s plunge.

Elsewhere, Japan’s Nikkei 225 stock index tumbled 2.85% to 17,604.12, while Philippine stocks plunged 7.9%, their worst drop since 1997, at the height of the Asian financial crisis.

Malaysian stocks, after falling as much as 8.2%, closed down 3.3%. Australian stocks closed down 2.7% after falling as much as 3.5%.

In Europe, the UK’s benchmark FTSE 100 Index was down 0.9% in midday trading, while France’s CAC 40 Index was down about 1% after opening down more than 2%. In Frankfurt, the DAX index was down 0.9% to 6,758.17.

Here at home, Statistics Canada reported that investment in non-residential construction and machinery and equipment is expected to grow 5.8% in 2007, after three years of strong growth.

The Canadian dollar opened at US85.62¢, down 0.11 of a cent.

In U.S. economic news, the U.S. Commerce Department today revised downward fourth-quarter gross domestic product growth to 2.2% from 3.5%.

Oil prices fell Wednesday amid expectations for lower demand from China, the world’s second-largest oil consumer. Light sweet crude for April delivery dropped 45¢ to US$61.01 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

Global markets plummeted Tuesday, sparked by a selloff in China’s premier exchange that then spread to Europe and North America.

In Toronto, the S&P/TSX composite index lost 364.35 points, or 2.72%, to 13,040.11, giving back practically all the gains it made in February.

The TSX said Tuesday was a record day
trading on the exchange with 615,234 trades taking place. This surpassed the previous record set on Nov. 1, 2006 of 614,446.

New York markets also sank. The Dow Jones industrial average lost 416.02 points, or 3.29%, to 12,216.24, its biggest one-day drop in five-and-a-half years.

The Nasdaq composite index lost 96.65 points, or 3.86%, to 2,407.87, and the S&P500 lost 50.33, or 3.47%, to 1,399.04.

The junior S&P/TSX Venture composite index dropped 164.67 points, or 5.03%, to 3,109.97.