Asia stock markets rally after late gains on Wall Street

Asian markets rallied Wednesday after Wall Street ended a gruesome run of losses on the back of signals from the Federal Reserve that interest rates will remain near zero for two more years.

The worst sell-off on global markets since the 2008 financial crisis ended, for the time being at least, with a strong swing into positive territory in New York late Tuesday after the Fed announcement.

Tokyo went to lunch with a 1.15 percent gain, while Sydney grew 2.68 percent and Seoul added 1.04 percent in morning trade. A brutal run of falls ended with a 3.41 percent rise in Hong Kong, and Shanghai was up 1.28 percent.

Asian investors took heart from New York, where the the Dow index of 30 blue-chip stocks staged a dramatic late rally to close 3.98 percent higher. The broader S&P 500 climbed 4.74 percent and the tech-heavy Nasdaq firmed 5.29 percent.

Markets had already set a positive course in Europe on Tuesday. London's FTSE-100 index finished 1.89 percent stronger and Paris's CAC-40 added 1.63 percent. Frankfurt's DAX was virtually flat.

(Earlier on GlobalPost: Wall Street stocks end higher)

"Market sentiment hasn't stabilized yet, so while we'll likely see a relief rally today, it'll be a rocky path to recovery," Toshiyuki Kanayama, market analyst at Monex in Tokyo, told The Wall Street Journal.

Other analysts also urged caution. Credit Agricole said in a note to clients that it was too early to conclude that the bearish sentiment of recent days was over.

"Volatility is calming down from an extreme level. Clearly there's going to be considerable concerns still, but the market had gotten seriously carried away and gone to an extreme of fear," RBS strategist Greg Gibbs told Reuters in Sydney.

Investors around the world have pulled trillions of dollars out of share markets this month amid fears of a double-dip global recession, fueled by a U.S. credit rating downgrade and Europe's contagious debt crisis.

The Fed said growth had been slower than expected this year and interest rates would remain at "exceptionally low" levels through mid-2013.