The MfSCI index of Asia-Pacific stocks traded outside of Japan was up 2.7 per cent, also rebounding from the lowest since October 2006.

South Korea's Kospi climbed 3.5 per cent after ending on Friday at the lowest since March 2007 while Australia's S&P/ASX 200 rose 3.2 per cent.

Paul Schulte, a regional strategist with Lehman Brothers in Hong Kong, told the Reuters news agency that the US move had taken some of the risk out of the market.

"So in that sense this is good for other financial assets - you have reduced systemic default risk," he said.

But he also warned that "longer-term we have a lot more glass to crawl over because we have arrangements with other financial institutions that need to get worked out".

The US government on Sunday seized control of Fannie Mae and Freddie Mac, which own or guarantee half of all US mortgages, ending weeks of speculation after regulators judged the companies' shrinking capital position left them too vulnerable.

As part of the plan, the treasury is taking an equity stake in the companies and promised to purchase mortgage-backed securities they issue and provide however much liquidity is necessary to keep them afloat - actions that could cost $200bn.

But Citigroup analysts said that the longer Washington increases its debt to essentially restructure the housing market, the more the dollar and US assets in general would be seen in a negative light.