Markets rebound but volatility remains

Stock markets in Asia, Europe and the United States stabilized on Tuesday and Wednesday, after massive earlier volatility over fears that the U.S. was heading for a recession.

The sell-off began on Friday, after U.S. employment figures were down on what was expected.

The data followed several other releases of bad news, including poor returns from some technology companies, and the U.S. Federal Reserve leaving interest rates at 5.25 percent to 5.5 percent, instead of cutting them.

Asian markets were also shaken by last week's surprise Bank of Japan interest rate rise.

However, after the sharp falls, stocks rallied, particularly in Japan on Wednesday, after Bank of Japan Deputy Governor Shinichi Uchida said in a speech that there had been volatility in domestic and overseas financial markets, but that "it is necessary to maintain current levels of monetary easing for the time being".

Markets interpreted this as a signal there will not be additional rate hikes this year, and that there will not be a risk of overtightening.

The yen shifted from 144.7 against the U.S. dollar to 146.82 and the Topix index closed 2.3 percent higher. The rally included the Nikkei 225 index, which features technology and retail companies, closing 1.2 percent higher.

The rebound followed Japanese stocks falling a combined 20 percent over three sessions between Thursday and Monday, the biggest drop on record and equal to a $1.1-trillion loss.

Elsewhere in Asia, South Korea's Kospi index rose almost 2 percent in Wednesday trading, and Taiwan's benchmark index closed almost 4 percent up. India's benchmark Nifty 50 and Hong Kong's Hang Seng were also up by more than 1 percent.

A similar story also emerged in European and U.S. markets, with the S&P 500 rising by 0.7 percent and the technology-focused Nasdaq up 0.5 percent.

London's FTSE 100 futures was up 1 percent and Europe's Stoxx 50 saw a rise of 0.8 percent.

Sho Nakazawa, equity strategist at Morgan Stanley MUFG, told the Financial Times that volatility had calmed, but was likely not over.

"The biggest concern among market participants is whether pessimism over the U.S. economic outlook has gone too far," Nakazawa said. "The markets will remain highly sensitive to U.S. inflation and job statistics for the foreseeable future."

And economist Mohamed El-Erian, president of Queens' College at the University of Cambridge, told the BBC: "What happens in the U.S., economically and financially, does not stay in the U.S.. The U.S. has been the major driver of global economic growth, the U.S. consumer is a very important engine of economic activity, so the world as a whole would suffer if the U.S. were to go into recession."