(Agencies)
Updated: 2008-01-23 20:34

Tokyo -- Most Asian markets rebounded Wednesday, reversing their recent gut-wrenching plunge as investors welcomed a hefty, surprise interest rate cut by the US Federal Reserve to shore up the sagging American economy.

But European markets slipped in early trading.

Analysts said the market turmoil would linger for some time because the Fed's emergency action was seen by some as a sign American authorities view the US credit crunch as a very serious problem.

"The Fed's action provided a very positive surprise," said Tsuyoshi Segawa, strategist at Shinko Securities Co. in Tokyo. "But people are also starting to think that things may be so bad they needed to act."

In Hong Kong, the Hang Seng index surged 10.7 percent -- its biggest gain 10 years -- to 24,090.17, regaining much of the 13.7 percent it had shed over the previous two days.

Japan's Nikkei 225 index rose 2 percent to close at 12,829.06 after tumbling 9.3 percent the previous two days, while India's Sensex was up 5.7 percent in afternoon trading, recapturing nearly half its 12 percent losses from Monday and Tuesday.

In Shanghai, China's benchmark index, which sank 12 percent earlier this week, bounced back 3.1 percent, and Australia's market rebounded 4.4 percent, snapping a 12-day losing streak.

Fears of a US recession, which would likely erode demand for Asian exports, has battered the region's markets since the start of the year.

The sell-offs accelerated Monday and Tuesday amid skepticism that a stimulus package announced by US President George W. Bush on Friday would prevent the economy from contracting.

Jolted by worries of a global recession, the Fed on Tuesday slashed its federal funds rate three-quarters of a percentage point to 3.5 percent, the biggest reduction in this target rate for overnight loans on records going back to 1990. It also was the first time the Fed has changed rates between meetings since 2001.

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