Most Asian markets rose Monday as bargain-buyers moved in following last week's global rout, but investors continue to fret over the economic fallout from the new coronavirus as the worldwide death toll rises.
After equities suffered their worst week since the financial crisis more than a decade ago, central banks began to flag support measures, with Federal Reserve boss Jerome Powell hinting at a fresh interest rate cut at the bank's next meeting.
Still, analysts warned of further turmoil on trading floors as governments struggle to contain the disease, which has now killed more than 3,000 people and infected almost 90,000.
"Markets face significant uncertainty in the short term and remain at high risk of more downside given the unknowns around COVID-19," Shane Oliver, a global investment strategist at AMP Capital Investors, said.
Traders remain worried the disease "will disrupt economic activity more deeply and for longer than had been expected a week or so ago".
Shanghai led gainers, rising more than two percent after dropping more than five percent last week, while Hong Kong was up 0.7 percent after a loss of around four percent.
The gains came despite an index of Chinese manufacturing activity falling to its lowest level on record in February as factories around the country were shuttered.
Tokyo was up more than one percent at lunch, while Seoul added a similar amount with Jakarta 0.5 percent higher, Bangkok climbing one percent and Singapore up 0.3 percent.
However, Sydney fell 0.9 percent after Australia recorded its first death from the virus, while Wellington gave up two percent. There were also losses in Taipei and Manila.
AxiCorp analyst Stephen Innes warned that fear was playing a major role in driving markets.
"With the headline bombardment through social media outlets, any sense of rational thinking appears to have gone missing," he said in a note.
"Near-term, the markets will be driven by how far the fear of the coronavirus spreads, probably not how the data plays out."
He added that "since global growth has rested on consumer spending over the last year, if consumers are afraid (whether rational or not), the markets will collapse".
Investors are betting on a Fed rate cut at its March 17-18 policy meeting after Powell made a rare unscheduled statement on the outbreak, which he said "poses evolving risks to economic activity".
He said the central bank was "closely monitoring developments and their implications for the economic outlook", adding: "We will use our tools and act as appropriate to support the economy."
Markets are betting on as many as two interest rate cuts this year, which has weighed on the dollar, sending it to a near four-month low against the yen. It also retreated against higher-yielding, riskier units including the South Korean won, Australian dollar and South African rand.
Monday's bounce in major markets also saw a rally in oil prices, which suffered a pummelling last week.
Both main contracts rose more than two percent in early trade, though they have lost around a quarter of their value since the start of the year with investors spooked by falling demand in key consumer China.
The sharp drop in crude prices dented Gulf markets Sunday, with the Saudi bourse, the region's largest and one of the world's top ten, shed 3.7 percent.
Tokyo - Nikkei 225: UP 1.1 percent at 21,377.87 (break)
Hong Kong - Hang Seng: UP 0.8 percent at 26,343.15
Shanghai - Composite: UP 2.5 percent at 2,952.06
Dollar/yen: DOWN at 107.92 from 108.06 at 2230 GMT on Friday
Euro/dollar: UP at $1.1057 from $1.1029
Pound/dollar: UP at $1.2823 from $1.2821
Euro/pound: UP at 86.23 pence from 86.00 pence
Brent Crude: UP 2.3 percent at $50.83 per barrel (new contract)
West Texas Intermediate: UP 2.1 percent at $45.70 per barrel
New York - Dow: DOWN 1.4 percent at 25,409.36 (close)
London - FTSE 100: DOWN 3.2 percent at 6,580.61 (close)