TOKYO -- Asian stocks rebounded in early trade Friday as investors set aside fears of a severe global recession and hunted for bargains after several days of sharp falls on world markets.

Dealers took their cue from a powerful rally overnight on Wall Street where the Dow Jones Industrial Average leapt 6.67 percent as investors scooped up beaten-down stocks after a punishing three-day market sell-off.

"The rally is just driven by bargain hunting after the sharp dips," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC in Tokyo.

Japan's Nikkei index jumped 4.26 percent by the lunch break while Hong Kong opened 4.0 percent higher. Singapore stocks gained 2.50 percent and Sydney rose 2.9 percent.

After a drop of more than nine percent in the Nikkei over the previous three days, "stocks are at cheap levels," Hiroichi Nishi, general manager at Nikko Cordial Securities, told Dow Jones Newswires.

The yen rose as currency dealers fretted over the US economy. The dollar slipped to 97.05 yen, down from 97.67 in New York late Thursday. The euro softened to $1.2771 from $1.2779 and to 123.98 yen from 124.84.

"There was no logical reason as to why shares rose, and worries remain over how the US will handle the financial crisis," said Yosuke Hosokawa, chief forex strategist at Chuo Mitsui Trust Bank.

The rebound in stocks came despite data showing a steep drop in both imports and exports in the United States, highlighting the slowdown in the world's biggest economy and a likely global recession, dealers said.

The European Union was expected to report the 15-nation eurozone's plunge into recession Friday, with a string of economic indicators pointing downwards and European governments struggling for a unified response.

News that recession is sweeping across advanced economies raised the stakes ahead of financial crisis talks among leaders of the Group of 20 major rich and developing countries in Washington on Friday and Saturday.

"We don't expect that a positive surprise out of the talks will give a quick boost to stocks" although policy measures taken after the gathering may help prop the market up, said Takahashi at Daiwa Securities SMBC.

Japanese Prime Minister Taro Aso will tell the summit his country is ready to lend up to 100 billion dollars to the International Monetary Fund to boost assistance for emerging countries hit hard by the financial crisis.

He will also call on other member countries of the IMF to give more funds to the institution so that it can help emerging nations, which are expected to be a key driver of global economic growth, according to his office.

The Organisation for Economic Cooperation and Development (OECD) forecast that the United States would suffer a severe 2.8 percent contraction in the fourth quarter of this year and shrink 0.9 percent in 2009.

"The OECD as a whole is currently in recession and will likely stay there for some time," OECD economist Joergen Elmeskov said.

European bourses ended mixed Thursday. London's FTSE 100 index fell 0.31 percent while the Paris CAC 40 climbed 1.1 percent and Germany's DAX added 0.62 percent.