Asian stocks turned in a mixed performance Wednesday, giving up early gains as a U.S. plan to rescue troubled insurer AIG failed to persuade many investors that recent financial turmoil would soon ease.
European shares were higher in early trade.
Asia's markets opened mostly higher as Wall Street's rise overnight lifted sentiment after Tuesday's huge sell-off. Japan's Nikkei 225 average added 1.2 percent to 11,749.79 after sinking nearly 5 percent the day before to its lowest finish in more than three years.
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South Korea's Kospi climbed 2.7 percent and Taiwan's benchmark rose 0.8 percent.
But Hong Kong's blue-chip Hang Seng Index dropped 3.6 percent to 17,637.19, dragged by Chinese banks to its worst close since October 26. China's Shanghai benchmark fell 2.9 percent, while Australia's S&P/ASX 200 shed 0.6 percent.
Investors sent the region's stocks spiraling downward Tuesday, reacting with alarm to the upheaval on Wall Street that saw investment bank Lehman Brothers Holdings Inc. file for bankruptcy and Merrill Lynch & Co. sell itself to Bank of America Corp.
The Federal Reserve helped allay some fears about the financial system with an $85 billion emergency loan to shore up insurance giant American International Group Inc., still reeling from billions of dollars in risky mortgage debt. The Fed said Tuesday it acted because a disorderly failure of the company, whose financial dealings stretch around the world, could hurt the already delicate markets and the economy.
But there were lingering fears across the region of more trouble ahead should bank stocks sink further and credit losses continue to pile up.
"AIG helped stabilize the market earlier, but there could be more turmoil. You don't know who's next to go," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
While somewhat disappointed by the Fed's decision to leave interest rates unchanged, markets were buoyed by an overnight advanced on Wall Street. The Dow Jones industrial average climbed 141.51 points, or 1.30 percent, to 11,059.02. The index plunged 504-points Monday, its biggest point drop since the September 2001 terror attacks.
Oil prices rose in Asian trading but remained well below $100 a barrel. Light, sweet crude for October delivery rose $3.5 to $94.00 on the New York Mercantile Exchange, after dipping as low as $90.51 Tuesday, its lowest level since Feb. 8.