(CNN) -- Asian stocks gained ground Tuesday afternoon after steep drops earlier in the day following Wall Street's biggest plunge since 2008, with Australia's All Ordinaries index closing in positive territory -- up 1% -- after declining 5% in morning trading.
Japan's Nikkei also recovered, closing down 1.7% after falling 4.4% in morning trading. South Korea's KOSPI closed down 3.64%.
Hong Kong's Hang Seng finished down 5.66%, paring losses after losing more than 7% earlier.
Investors have been reacting with uncertainty to the United States' loss of its coveted AAA credit rating last Friday and to the ongoing eurozone crisis.
On Monday the Dow Jones industrial average plummeted more than 630 points, or 5.5%, and was pushed below 11,000 for the first time since November. The S&P 500 fell 6.6% and Nasdaq Composite was down around 6.9%.
Also on Monday, Standard & Poor's downgraded mortgage giants Fannie Mae and Freddie Mac, doxens of U.S. cities, insurance companies and other entities with ties to the U.S.' credit rating.
More downgrades are expected through the week.
The move by S&P to downgrade the U.S. from AAA to AA-plus triggered heavy criticism from President Barack Obama's administration amid fears it could contribute to another recession.
Standard & Poor's John Chambers told CNN the downgrade was based on the political polarization in the U.S., following debate over raising the borrowing ceiling, and the country's high levels of debt.
Moody's, another major ratings agency, affirmed its rating of the U.S. debt at AAA on August 2. It has said a ratings downgrade is possible before 2013 if fiscal discipline is weakened or by a significant deterioration in economic outlook.
Besides the U.S. downgrade, investors are concerned about the debt crisis in some European nations, though actions on the part of the G7 and the European Central Bank Sunday helped to allay some of those fears.
Financial representatives of leading industrial nations said they are committed to taking "all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence."
The G7 nations are the United Kingdom, France, Germany, Italy, Japan, Canada and the United States.
Similarly, the European Central Bank made a bid to calm markets Sunday. It said it would implement a bond-purchase program and welcomed announcements by Italy and Spain on new measures meant to reduce their deficits. It told the governments of those countries that a "decisive and swift implementation" of reforms is "essential."
The move represents an escalation in the official response to Europe's debt crisis, which is now more than a year old and until recently was contained to smaller economies like Greece, Ireland and Portugal.
International Monetary Fund Managing Director Christine Lagarde cheered the announcements.
"I welcome the statements from the European Central Bank, from the leaders of Germany and France as well as from the G7, and their renewed commitment to take all necessary action in a coordinated way to ensure stability and liquidity in the financial markets. This cooperation will contribute to maintaining confidence and spurring global economic growth," she said in a statement.
CNN's Tom Cohen, Kyung Lah, Ed Payne, Pamela Boykoff, Jiyeon Lee, Mark Meinero, Irene Chapple and CNNMoney staff contributed to this report.