Japan's benchmark Nikkei rebounded from two days of heavy losses with a 2 per cent gain today as a US rate cut eased economic worries, but nerves about where Wall Street might go next held back the optimism.
A higher yen also limited gains, which had taken the benchmark Nikkei share average up nearly 4 per cent at one point. Banks such as Mizuho Financial Group were among those to finish off their highs.
Market players said the Nikkei, which has lost 16 per cent this year, was more than due for a rebound and the US Fed's biggest rate cut in two decades was a suitable spur.
"The market knew that something had to be done, so there wasn't that much actual surprise in the Fed move, and it certainly hasn't quenched all the fears about a possible US recession," said Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management.
"People are waiting to see what will happen today in New York, and this is keeping them from really actively buying." The Nikkei gained 256.01 points to 12,829.06, after a brief spike above 13,000 early in the day.
Yesterday it tumbled to its greatest one-day loss since the September 11th, 2001, attacks on the United States. The broader TOPIX rose 2.5 per cent to 1,249.93 as advancing shares outnumbered declining ones by more than six to one.
US stocks fell yesterday, the first trading day after a long weekend, but the decline was shallower than feared after the Fed slashed interest rates by 75 basis points.