The MSCI index of Asian stocks outside Japan was up three per cent at 03:00 GMT - marking its first gain in four sessions.

The MSCI index had plunged 11.4 per cent over the previous three trading sessions amid fears over the US economy.

Markets in Australia and Singapore rose about two per cent, with South Korea, Taiwan and Shanghai recording gains of more than one per cent.

Markets across Asia posted huge losses on Thursday after Henry Paulson, the US treasury secretary, said the American government's banking rescue package would focus on taking stakes in banks rather than buying up lenders' toxic mortgage debts.

'Market turmoil'

While some regional bonds continued to fall, the Japanese yen recovered from Thursday's sharp fall against the dollar and the euro. Traders believe investors are banking on the perceived safety of the Japanese currency.

"The anxiety of the financial market turmoil has not disappeared. So market demand for the dollar and the yen driven by flight-to-safety will likely remain," said Yousuke Hosokawa, senior manager at Chuo Mitsui Trust and Banking in Japan.

"The market just can't brush away its worries about issues such as how large the losses by US financial corporations will be and whether the $700bn US bailout plan will suffice."

The Asian stock market rebound comes before a meeting between the G20 industrialised and emerging nations in Washington on Friday. The group will discuss the global economic crisis.

Elsewhere, the financial outlook has remained bleak with Germany - Europe's biggest economy - announcing on Thursday that it had officially fallen into recession.

The Organisation for Economic Co-operation and Development (OECD) slashed its economic output forecasts for major economies and said its 30-strong membership appeared to have entered a recession.

Meanwhile, the US statistics revealed the number of American workers drawing unemployment benefits hit a 25-year high in November. Imports to America, the world's biggest economy, suffered a record fall in September.