Despite the rebound many investors remain nervous over the global economic outlook [AFP]

In Japan Tuesday saw early losses reversed as the benchmark Nikkei index ended the trading day up by 6.4 per cent, giving some much-needed optimism after hitting a 26-year low on Monday.

A weakening of the yen against the dollar encouraged investors to buy exporters like Toyota and Sony, whose overseas earnings are threatened by a strong yen.

Toyota shares ended the day up 7.8 per cent, Sony up 9.6 per cent and Honda surged 14 per cent.

Nonetheless the Nikkei remains far from recovery, having lost nearly 40 per cent of its value in the past month amid continuing widespread gloom over the global economic outlook.

Analysts say confidence remains razor-thin, with expectations of more market upheaval in the days and weeks ahead.

In Hong Kong on Tuesday the benchmark Hang Seng index also saw a rebound, jumping a massive 14.4 per cent after nose-diving more than 12 per cent on Monday.

Tuesday's close was the biggest percentage gain in 11 years.

Bargain-hunters snapped up stocks in companies like banking giant HSBC, which had slumped on Monday to levels last seen during the outbreak of the deadly Sars virus in 2003.

HSBC stock rallied by 20 per cent – its biggest one-day gain in 20 years.

South Korea's Kospi index also recovered after early losses, ending the day up 5.6 per cent.

Domestic investors were given a boost following the biggest rate cut ever by the central bank on Monday, snapping up shares in Samsung Electronics which rose rose 5.8 per cent, and Hyundai Motors which jumped 12.6 per cent.

Expectations that the US Federal Reserve is set to slash interest rates later on Tuesday helped give Asian investors some glimmers of optimism through what has been several weeks of gloom.

The Asian rebound also gave a lift to European markets, most of which opened Tuesday's trade in the black.

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