By Agence France-Presse
Shanghai and Hong Kong bore the brunt of the sell-off Tuesday after Beijing warned it would retaliate in kind to Donald Trump's threat of tariffs on hundreds of billions of dollars' worth of Chinese goods, amounting to much of its exports to the US.
The standoff follows weeks of fruitless talks between the world's two biggest economies, with the White House accusing China of a string of unfair practices including cyber-theft and forced technology transfers that are hurting American jobs and companies.
Tuesday's developments surprised many traders who had characterised Trump's protectionist rhetoric as part of a strategy to get a better deal from China.
Trump senior economic aide Peter Navarro continued the forceful language Tuesday by saying China had more to lose from a trade war because it shipped more to the US.
He also maintained the administration was acting "to defend the crown jewels of American technology from China's aggressive behaviour".
Navarro said the White House was open to talks but warned: "The fundamental reality is talk is cheap. Delay is expensive."
OPEC in focus
Still, traders stepped back in to pick up beaten-down equities Wednesday.
Hong Kong was up 0.8 percent in the afternoon after dropping 2.8 percent Tuesday, while Shanghai ended up 0.3 percent -- a small dent in the previous day's 3.8 percent loss.
Tokyo ended 1.2 percent higher while Sydney gained by a similar percentage, Singapore added 0.7 percent and Seoul put on one percent. There were also gains in Wellington, Taipei and Bangkok.
In early European trade London rose 0.8 percent and Frankfurt gained 0.5 percent.
"Markets are faring much better as investors' emotions have tempered, but in general, markets remain in wait and see mode," said Stephen Innes, head of Asia-Pacific trading at OANDA. "Clarity is power but given the lack thereof, it's a struggle to get back in the saddle as a sense of once bitten, twice shy continues to permeate.
"The spoils of trade war have attracted bargain-hunting but completely trusting the markets in the aftermath of yesterday's meltdown is bordering on too soon, too quick as sentiment remains very apprehensive."
Rakuten Securities Australia chief operating officer Nick Twidale added: "Markets are preparing for further downside whilst hoping that the latest salvos from the Trump administration prove to be another 'negotiating' tactic."
The dollar clawed back early losses against the yen but analysts warn it is still likely to face further pressure as investors look to the Japanese unit as a point of safety in times of turmoil.
The euro faced more selling following dovish comments about monetary policy from European Central Bank boss Mario Draghi, while the pound was also down against the dollar.
Eyes are turning to OPEC's crucial meeting as Saudi Arabia pushes, along with non-member Russia, to raise an output ceiling that has supported oil prices for 18 months.
The two major producers are facing stiff opposition at the June 22-23 gathering from nations that have benefited from the increased revenues.
"It does seem like an increase is coming," said Greg McKenna, chief market strategist at AxiTrader. "The question is, can such a move be achieved in order to balance the interests of OPEC's customers like the US and India while still holding the cartel together as a functioning group?"
Key figures around 0720 GMT
Tokyo - Nikkei 225: UP 1.2 percent at 22,555.43 (close)
Hong Kong - Hang Seng: UP 0.8 percent at 29,688.70
Shanghai - Composite: UP 0.3 percent at 2,915.73 (close)
London - FTSE 100: UP 0.8 percent at 7,664.83
Euro/dollar: DOWN at $1.1566 from $1.1587 at 2100 GMT
Pound/dollar: DOWN at $1.3153 from $1.3178
Dollar/yen: UP at 110.20 yen from 110.04 yen
Oil - West Texas Intermediate: UP 33 cents at $65.40 per barrel
Oil - Brent Crude: UP 35 cents at $75.43 per barrel
New York - Dow Jones: DOWN 1.2 percent at 24,700.21 (close)