In morning trading in Europe, Britain's FTSE 100 fell 0.46 per cent to 4,289.33, Germany's DAX slipped 0.74 per cent to 4,694.78, and France's CAC-40 dropped 0.78 per cent to 3,226.38. Shares in BNP Paribas plunged more than 16 per cent after the bank revealed steep losses in investment banking over the last two months.

'While there was applause for the (Fed) cuts we saw yesterday, investors are now standing back and reflecting further on what that means,' said Mr Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.

'Some nervousness has been expressed in the currency markets. We have seen a weakened dollar, which has probably had an effect on the markets across the board,' he added.

The dollar fell from 88.96 yen to 88.33 yen, trading as low as 88.22 yen, near a 13-year low. The euro strengthened further to $1.4075 in European morning trading. The euro had gone as high as $1.4148 late Tuesday, its highest point since Oct. 1.

In Asia, markets climbed higher. Japan's Nikkei 225 stock average rose 44.50 points, or 0.5 per cent, to 8,612.52 after initially rising 1.1 per cent, and Hong Kong's Hang Seng Index rose 2.2 per cent to 15,460.52.

South Korea's Kospi added 0.7 per cent to 1,169.75, while benchmarks in Thailand and Australia also gained. However, China and Singapore stocks closed largely flat and India's benchmark lost ground.

Investor enthusiasm was tempered by a mix of lingering worries about the U.S. economy and a weakening dollar that threatened to add to the woes of Asia's exporters. Also weighing on markets was a steep drop in US stock futures, suggesting Tuesday's rally on Wall Street would quickly fizzle.

Overnight, the Dow Jones industrials surged more than 4 per cent after the Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 per cent and pledged to use 'all available tools' to heal the US economy.

The central bank's bold actions surprised Wall Street - most analysts expected a 0.5 percentage point cut rather than 0.75 - and raised hopes of lower interest rates and cheaper money around the world to get companies and consumers spending again. In Asia, Hong Kong's central bank followed suit with its own rate reduction, while speculation mounted of further monetary easing from the Bank of Japan on Friday.

'Every central bank is pumping loads of liquidity into the markets and this is very positive for the markets,' said Mr John Mar, co-head of sales trading of Daiwa Securities SMBC Co. in Hong Kong.

Trade was far more cautious than in the US, where markets soared on the Fed's move. The Dow rose 4.2 per cent to 8,924.14 and the broader Standard & Poor's 500 index advanced 5.1 per cent to 913.18.

Dow futures were down 173 points, or 1.9 per cent, at 8,741 and S&P500 futures were off 22.40 points, or 2.5 per cent, at 890.40.

Analysts said the Fed's indications that it would do whatever is necessary to help bring an end to the longest economic contraction in a quarter-century underscored just how deep America's recession is.

'Investors in Asia have less confidence than their American counterparts in the Fed's ability to engineer an economic recovery,' said Mr Dariusz Kowalczyk, chief investment strategist for CFC Seymour in Hong Kong.

Tokyo's gains were limited by the souring dollar and worries about Honda, whose shares slid 4.2 per cent.

Japan's No. 2 automaker said late in the day it was slashing its profit forecast for the fiscal year and cutting managers' pay amid a global downturn in the auto industry. Nissan Motor Co. fell 4.1 per cent after announcing plans to scale back production by a further 78,000 vehicles and cut 500 temporary workers.

In Hong Kong, investors sent property firms surging after the territory's de facto central bank followed the Fed's move by cutting its base rate by a full percentage point to 0.5 per cent. Because the territory's currency is pegged to the dollar, the Hong Kong Monetary Authority's actions usually track the Fed's.

Oil prices rose, with light, sweet crude for January delivery up US$1.66 (S$2.41) to US$45.26 a barrel in European trade as investors awaited official confirmation that Opec has decided to cut output sharply.

The contract fell 91 cents to settle at US$43.60 a barrel overnight.

Saudi oil minister Ali Naimi said Wednesday that there was consensus among Opec members, who account for about 40 per cent of global supply, to cut production by 2 million barrels per day from Jan 1. -- AP