HONG KONG • Asian markets mostly recovered yesterday from the previous day's sharp losses, but Tokyo tumbled as investors returned from a long weekend to play catch-up, with car giants hit by the Volkswagen scandal. The Singapore market was closed for the Hari Raya Haji holiday.

The greenback edged up against most emerging-market currencies ahead of a closely watched speech later in the day by Federal Reserve chief Janet Yellen, when markets hope she will provide more clarity on plans for an interest rate hike.

Stocks and other high-yielding, or riskier, assets took a hit after the Fed's decision last week to hold - citing China's woes and a slowdown in developing markets - fanned concerns about the United States and global economies.

Such worries were exacerbated on Wednesday when a closely watched gauge of Chinese manufacturing activity for the month hit a 6½-year low, the latest in a string of results highlighting a severe slowdown in the world's No.2 economy.

The news sent shares in Asia plunging - with Shanghai and Hong Kong down more than 2 per cent - followed by losses in New York.

Yesterday, however, investors in most markets turned buyers, with Shanghai ending 0.86 per cent higher, Sydney adding 1.47 per cent and Seoul 0.13 per cent higher.

But Hong Kong continued to drop, shedding 0.97 per cent by close. Tokyo finished 2.76 per cent down as trading began for the first time since Friday after a three-day public holiday. "Japanese markets have still got some catch-up to do after the uncertainty that's been washing through global markets," said Mr Tony Farnham, a strategist at Patersons Securities in Sydney.

"The issue is gauging the extent of the slowdown in China and the ongoing debate about whether the Fed is doing the right thing" on interest rates, he said.

Carmakers were among the big losers on Japan's Nikkei as the industry was rocked by the Volkswagen emissions scandal. Toyota fell 1.85 per cent, Nissan slid 2.5 per cent and Mazda plunged 6.8 per cent.

Attention was set to turn to Ms Yellen's speech, her first since last Thursday when she warned about the troubles in overseas markets.

Dealers will be looking to see if she sheds any more light on when the bank might lift borrowing costs, with some economists saying a lack of clarity is worse for markets than an actual hike.

AGENCE FRNCE-PRESSE, BLOOMBERG