Asian and European stock markets are mostly higher Tuesday after heavy losses Monday.

The key markets in Tokyo and Hong Kong closed up 1.5 percent, but the Chinese market in Shanghai was down nearly four percent.

European markets all opened higher.

The dollar is lower against the yen and the euro on speculation that the U.S. Federal Reserve will cut its benchmark interest rate at least one percentage point later Tuesday.

Financial markets are also waiting for earnings reports today from two major investment firms - Goldman Sachs Group and Lehman Brothers. News of the U.S. government-supported buyout of financially-stricken Bear Stearns a few days ago - one of the world's largest investment banks - has already depressed markets.

Under the buyout plan, another giant U.S. banking firm, J.P. Morgan Chase, will purchase Bear Stearns, with the U.S. government taking on some of the risk. The sale is valued at $250 million - a tiny fraction of the $20 billion Bear Stearns was worth a year ago.

The U.S. government has taken a series of measures to avert what some fear could be the collapse of other investment firms in a domino effect.

Crude oil prices have stabilized after Monday's drop of $4 a barrel, as investors move money into commodities and away from the sinking dollar.