Japanese stocks rebounded on Wednesday from a major pummeling that some investors thought overdone, lifting equities elsewhere and allowing the yen to dip from a near record high against the dollar.

Brent crude traded back around $110 a barrel after Bahraini security forces cracked down on protesters and while fighting in Libya simmered in the background.

Financial markets were readjusting from a worldwide battering of risk plays following the earthquake, tsunami and nuclear disasters that hit Japan, the world's third largest economy.

MSCI's all-country world stock index fell as much as 4.5 percent over the past three sessions on the back of a near 20 percent two-session dive on Japan's Nikkei average.

Wednesday's recovery saw the Nikkei regain 5.7 percent, but still left it down more than 11 percent for the year.

There was a widespread belief that the post-earthquake sell-off had gone too far too quickly, but still concern that the nuclear reactor crisis was unresolved.

Uncertainty in the Fukushima nuclear power plant is clearly making market participants very nervous, said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets in Tokyo.

The MSCI all-country index was up 0.8 percent on the day, though its year-to-date gains have been wiped out by the reaction to the disaster.

The FTSEurofirst 300 rose half a percent.

The sell-off is ... presenting some solid buying opportunities for the longer term investor, although with repeated bouts of panic selling also hitting the market, the outlook remains choppy, said Peter Stanhope at IG Markets.

YEN SLIPS

The dollar traded at 80.90 yen, recovering from a four-month low of 80.60 hit on Tuesday. The Japanese currency tends to rise during times of stress and has been boosted by expectations of repatriation of funds into Japan

We wouldn't talk about a recovery in dollar/yen yet, said Lutz Karporwitz, currency strategist at Commerzbank in Frankfurt.

Speculation over yen-selling intervention by Japanese authorities to weaken the currency has limited its upside so far.

The euro slipped 0.2 percent to $1.3975.

On bond markets, the week's flight-to-safety bid and a two-notch credit rating downgrade to A3 and the threat of more to come from Moody's mean Portugal is likely to face higher borrowing costs at a sale of up to 1 billion euros of 12-month paper.

Portuguese bonds underperformed, with 10-year yields 5 bps higher at 7.646 percent and the spread over Bunds widening to 449 bps.

The sale is expected to get done, however, supported by domestic demand.

(Additional reporting by Akiko Takeda, Antoni Slodkowski, Naomi Tajitsu, Kirsten Donovan and Atul Prakash; Editing by John Stonestreet)

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