The flight from risk in world stock markets has continued in Asia during volatile trading amid concerns over credit tightening in China and the winding down of US stimulus.
Asian stock markets suffered steep falls during much of Tuesday's session - with the Shanghai Composite Index entering bear market territory, analysts said, following falls of more than 5% at one stage on top of steep declines on Monday.
But Tuesday's losses were largely erased in late-trading - with Shanghai just 0.2% down - while Europe opened positively on perceptions that many stocks were now under-valued following weeks of falls.
The most recent worry for investors, particularly in Asia, has been that measures by the People's Bank of China (PBC) to curb a cheap credit boom would hurt growth in the world's second-largest economy.
Higher commercial lending rates prompted a flight from the stocks of smaller banks, which rely on central bank funding the most.
Prices correct at 08:25 BST The value of medium-sized lenders was also hurt.
While the PBC has said it is satisfied by the amount of money available, the crackdown has left markets in China particularly fearing a liquidity squeeze.
Shanghai's stock index had endured its biggest loss in four years on Monday while the pain was also felt worldwide, with the US and European markets falling back further, having already been spooked in recent weeks by the prospect of the US Federal Reserve easing its $85bn-a-month bond-buying programme.
A top US central banker warned on Monday against market attempts to lift the yields on US Treasuries and stop plans to slow the Fed's stimulus.
Price correct at 08:30 BST Richard Fisher, who is president of the Dallas Federal Reserve, told the Financial Times that "feral hogs" would not break the Fed's resolve.
The FTSE 100 share index lifted 0.7% in early trading on Tuesday from five-month lows while there were stronger gains on the continent.
The London market has lost more than 10% of its value since concerns first arose last month about the prospect of Fed stimulus easing.
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