Stocks rebound from rout as Fed faces calls to cut rates early

Most equities rallied Tuesday after the previous day's global rout fuelled by U.S. recession fears that have led to calls for the Federal Reserve to cut interest rates before its next meeting.

Tokyo, which suffered a record loss Monday, led the gains as it soared more than 10 percent as traders bought beaten-down stocks caught up in a catastrophic day for markets.

But analysts warned that there would likely be more volatility to come.

The sell-off followed data Friday which showed fewer U.S. jobs than expected were created last month, while another report pointed to continuing weakness in the manufacturing sector.

That led to warnings the Fed had kept rates at more than two-decade highs for too long and risked causing a recession.

Some analysts pointed to the "Sahm Rule," which says an economy is in the early stages of recession if the three-month moving average of unemployment is 0.5 percentage points above its low over the previous 12 months. That was triggered by Friday's data.

Commentators also said a stronger yen had led investors to unwind their "carry trades", in which they borrowed in the cheap Japanese currency to invest in higher-yielding assets, such as equities.

While Wall Street's three main indexes suffered another day of pain — with the Nasdaq down more than three percent — a forecast-beating read on the key U.S. services sector provided some solace.

Tokyo's Nikkei, which tanked more than 12 percent Monday and suffered a record points loss, jumped 10.2 percent.

Toyota was up more than 12 percent, Sony piled on more than nine percent and chip giant Tokyo Electron added 16.6 percent.

"This is a sweeping, across-the-board gain," said analysts at Nomura, adding that investors would...