TOKYO: Tokyo stocks rebounded more than three percent on Wednesday morning with investors relieved to see New York shares staging a rally after sharp drops.
The benchmark Nikkei index, which fell nearly five percent on Tuesday to suffer the worst loss since the November 2016 election of Donald Trump as US president, bounced back 3.06 percent or 660.32 points to 22,270.56 by the end of the morning session.
The broader Topix index gained 3.08 percent or 53.74 points to 1,797.15.
"If the New York Dow stops falling, foreign selling of Japanese stocks will likely cease," said Masayuki Kubota, chief strategist at Rakuten Securities.
"Given that the Japanese economy and corporate earnings are good, it is highly likely that 21,078 will be the bottom of the latest crash," he said in a note, referring to the Nikkei's intraday low on Tuesday when the key index was down more than seven percent.
Bargain hunters swooped in to buy Wall Street stocks on Tuesday, stemming a haemorrhage that had been spreading panic among investors globally.
After Asian and European equity markets plunged on Tuesday, New York stocks started their trading day with another jaw-dropping fall as the Dow index dived nearly three percent, adding to the previous day's record loss.
But within minutes a fierce battle appeared to be playing out between those betting on further declines, and those who thought that the market correction had gone too far, leading to some wild price gyrations.
The blue-chip Dow Jones Industrial Average closed up 2.3 percent at 24,912.77.
The dollar was changing hands at 109.43 yen on Wednesday against 109.57 yen in New York.
In individual Tokyo stocks, Toyota jumped 4.99 percent to 7,650 yen a day after the auto giant upgraded annual profit forecasts, as Sony rallied 3.93 percent to 5,546 yen.
Mobile operator and IT investor SoftBank Group was up 3.89 percent to 8,695 yen ahead of the release of its earnings report later Wednesday.
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