Asian stock markets rebounded from a five-year low on Friday, but signs of distress in the global economy are mounting.
Fears of a deep global economic recession have pummeled investor confidence all week, spurring more liquidation of assets such as stocks and commodities and pushing the yield on 10-year US Treasuries below 3% for the first time in 50 years.
Wall Street shares fell steeply for the second day in a row on Thursday, amid growing fears of a protracted economic downturn. Shares in US bank Citigroup plunged on fears about its future, oil prices fell and the future of US automakers hung in the balance.
The Dow Jones average tumbled 5.5% after politicians said they could not agree on an immediate $US25 billion bail-out for troubled US auto giants General Motors, Ford and Chrysler.
The Bank of Japan, which left interest rates unchanged at 0.3%, warned a recovery would take time given the economic slowdown and turmoil in financial markets.
But stock markets in the Asia-Pacific region rebounded on Friday amid rumours that China intended to cut interest rates soon, prompting investors to cover short positions before the weekend.
The MSCI index of Asia-Pacific stocks outside Japan climbed 3.3%, having slid 3.2% earlier in the day to the lowest since October 2003.
South Korea's KOSPI led gains with a rise of almost 6%, while Japan's Nikkei average added nearly 3%.
The Australian share market performed a surprise turnaround in the last hour of trade to finish in positive territory on Friday after four consecutive days of losses. Resource and financial stocks pulled the local bourse higher.
At the 1615 AEDT close, the benchmark S&P/ASX200 index was up 63.6 points, or 1.9%, at 3,416.5, while the broader All Ordinaries index had gained 54.3 points, or 1.63% to 3,386.9.
But in New Zealand the market continued to fall, with the benchmark NZX 50 down 66 points, or 2.5%, to 2578 on turnover of $79 million.
Top stocks Telecom fell 7 cents to $2.24, Contact slid 41c to $6.39 while Fletcher Building lost 6c to $5.42. Tower was up 1c to $1.44 after its annual profit rose 17% to $40.5 million in the year to September.