San Francisco Frontiers - European stocks steady, Tokyo soars after rout

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

But analysts warned there would likely be more volatility to come even as Europe's main stock markets -- which had fallen far less sharply Monday than their Asian peers -- steadied Tuesday.

Monday's sell-off followed data Friday showing fewer US jobs than expected were created last month, while another report pointed to continuing weakness in the manufacturing sector.

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

It meanwhile triggered market speculation that the US central bank could carry out an emergency cut to interest rates ahead of an expected reduction next month.

The dollar rose against main rivals Tuesday.

"Volatility persists" in markets, noted Richard Hunter, head of markets at Interactive Investor, adding that "emergency intervention from the Fed seems unlikely".

While Wall Street's three main indices suffered Monday -- the Nasdaq ended with a loss of more than three percent -- a forecast-beating read on the key US services sector provided some solace.

Tokyo had plunged 12 percent Monday, while the losses were far less severe in Europe.

London edged higher nearing the half-way stage Tuesday, while Paris dipped and Frankfurt flattened.

"Investors shouldn't assume this relative calm means markets are back to behaving rationally again," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

The technology sector was most hit by the global selloff on fears its sharp rally in recent times had been overdone.

It made a recovery Tuesday, while UK banking stocks saw solid gains after the Bank of England confirmed in a study that the UK's biggest lenders could be wound down without taxpayer bailouts in the event of a fresh financial crisis.

In foreign exchange trading Tuesday, the yen's rally against the dollar ran out of puff.

The Japanese unit, which hit a near four-decade low in July, later surged thanks in part to the Bank of Japan last week hiking interest rates.

- Key figures around 1115 GMT -

London - FTSE 100: UP 0.1 percent at 8,017.90 points

Paris - CAC 40: DOWN 0.2 percent at 7,132.43

Frankfurt - DAX: FLAT at 17,344.16

Euro STOXX 50: FLAT at 4,572.78

Tokyo - Nikkei 225: UP 10.2 percent at 34,675.46 (close)

Hong Kong - Hang Seng Index: DOWN 0.3 percent at 16,647.34 (close)

Shanghai - Composite: UP 0.2 percent at 2,867.28 (close)

New York - Dow: DOWN 2.6 percent at 38,703.27 (close)

Dollar/yen: UP at 145.11 yen from 144.05 yen on Monday

Euro/dollar: DOWN at $1.0910 from $1.0959

Pound/dollar: DOWN at $1.2695 from $1.2773

Euro/pound: UP at 85.92 pence from 85.77 pence

Brent North Sea Crude: UP 0.7 percent at $76.82 per barrel

West Texas Intermediate: UP 0.8 percent at $73.51 per barrel

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A.Clark--SFF