Japanese shares led Asian markets higher, climbing 4.9 percent after Tokyo launched a $16.7 billion scheme on Tuesday to help firms threatened by the financial crisis, reported Reuters.
In Europe, shares were expected to open down with the focus on earnings and a German business sentiment indicator, with Britain's FTSE 100 .FTSE seen falling 21 to 32 points and Germany's DAX .GDAXI expected down 6 to 31 points.
Japan's funding plan helped the Nikkei average .N225 to its biggest one-day gain in percentage terms since mid-December, along with a fall in the yen and a 9-percent surge in shares of Honda Motor Co (7267.T). The carmaker announced further production cuts in North America in Japan, but a newspaper reported it would boost capacity in China.
Japan's trade ministry said capital would be provided only while companies faced difficulty in fund-raising due to market turmoil, and firms receiving the funds would be required to draw up plans to boost profitability within three years.
"This news will be positive, since it's directed at firms in general and raises hopes that this will help with fund-raising, but the yen's fall has helped too," said Yutaka Miura, senior technical analyst at Shinko Securities.
"We'll have good news and bad news, just one mountain after another, before the downside really solidifies."
The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS was up 1.36 percent, after a 0.48 percent gain in the Dow Jones industrial average .DJI and a 0.56 percent rise in the Standard & Poor's 500 index .SPX on Monday.
Many Asian markets were closed for Lunar New Year, but Australian shares .AXJO closed up 3 percent after a one-day holiday, helped by miners such as Rio Tinto (RIO.AX), which were buoyed by a rebound in metal prices.
News of the funding plan helped push the yen down against the dollar and deepen its losses against the euro and sterling as shares gained and investor risk tolerance appeared to pick up.
The yen has tended to fall against higher yielding currencies as investor risk appetite improves and the currency had slipped on Monday after a rise in U.S. existing home sales and British bank Barclays (BARC.L) said it was not seeking fresh capital.
The euro was up 0.8 percent at 118.32 yen, well above last week's seven-year low of 112.08 yen, while sterling, which hit a record low last week, climbed 1 percent to 125.68 yen. The dollar gained 0.4 percent to 89.46 yen.
U.S. Treasuries edged down in Asia as shares rallied, sapping demand for safe haven debt, and the bond market was in wait-and-see mood ahead of a two-day Federal Open Market Committee meeting which ends on Wednesday.
The Fed is expected to leave the target range for the benchmark overnight federal funds rate unchanged at zero to 0.25 percent and to flesh out new ways to free up lending.
The benchmark 10-year note fell 2/32 in price to yield 2.653 percent, up about 0.5 basis point from late U.S. trade.
Japanese government bond futures dropped, tracking falls in Treasuries and euro zone government bonds and dented by the rebound in stocks from a three-month closing low on Monday.
Analysts warned investor sentiment could turn quickly, with layoffs continuing and European and U.S. corporations disclosing plans to cut more than 70,000 jobs to cope with the downturn.
Gold held steady just above $900 an ounce after a three-day rally on safe-haven buying.
Oil prices rose more than 1 percent, reversing losses as traders focused on short-term factors, such as cold U.S. weather and an Australian cyclone. U.S. light, sweet crude for March delivery climbed back above $46 a barrel.