HONG KONG, China (Reuters) -- Asian stocks rose on Tuesday as financial shares such as Macquarie Bank rebounded strongly in line with a rally in their U.S. peers, which helped drive the Dow to its biggest daily percentage gain since June 2003.
Tokyo's Nikkei average had risen 0.6 percent in early Tuesday trading.
Hopes the U.S. Federal Reserve will take steps to reassure investors that credit problems will not slow economic growth gave sentiment a boost, but lingering fears about a global credit squeeze were expected to cap the upside.
The Fed holds its rate-setting meeting later on Tuesday and investors will be watching closely to see how the U.S. central bank will address recent market turmoil.
At 0022 GMT, Tokyo's Nikkei average had risen 0.6 percent as Japan's top two banks Mitsubishi UFJ Financial Group and Mizuho Financial both climbed more than 1.5 percent.
A stronger dollar, lifted by the rally on Wall Street, also helped exporters such as Toyota Motor and Sony Corp. regain their footing.
"Bargain hunting will likely go into blue chip stocks as financial shares that had dragged down the U.S. market ended higher overnight and technically, the Nikkei is in a buying zone," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.
But energy firm INPEX Holdings slid 4.4 percent following a 5 percent drop in oil prices overnight.
In South Korea, gains of 3.1 percent for top lender Kookmin Bank and 2.3 percent for Shinhan Financial helped drive the key KOSPI up 1.5 percent.
This followed a 1.2 percent drop in Monday.
But investors were seen reluctant to push the market much higher before the Fed's policy meeting.
"Any rebound could be limited until after the Fed meeting," said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities.
Also back in favor, Australia's key S&P/ASX 200 index advanced 1.3 percent, thanks in part to a 5.4 percent jump in Macquarie Bank and gains of between 1.0 percent and 1.6 percent for all the big four Australia banks.
MSCI's measure of Asia Pacific stocks excluding Japan rose 0.8 percent, steadying after Monday's 2.2 percent tumble. The index is now down about 8.5 percent from a record high set on July 24.
On Wall Street, both the blue-chip Dow and wider S&P 500 index climbed more than 2 percent as investors snapped up beaten-down financial stocks such as Bear Stearns. E-mail to a friend
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