HONG KONG - The biggest drop in more than a year on Wall Street triggered fresh turmoil in Asian markets Friday, amid heightened anxiety over the eurozone debt crisis and doubts over the strength of the U.S. economy.
However, dealers halted their frantic selling of the euro, sending it slightly up against other major currencies and limiting earlier heavy share losses.
After government data showed the largest number of Americans lining up for unemployment insurance claims in five weeks, U.S. shares plunged 3.60 per cent with investors also gripped by deepening fears over Europe's debt.
Asian markets tumbled in response, with several markets hitting lows not seen for several months.
Tokyo dived 2.45 per cent, or 245.77 points, to close at 9,784.54, its lowest level since December 2.
Sydney ended 0.26 per cent, or 11.1 points, lower at 4,305.4 after slumping 2.9 per cent to a 10-month low earlier.
"This eurozone saga is turning into a bad horror movie," Phillip Securities economist Joshua Tan told Dow Jones Newswires. "You think the monster is dead but it keeps coming back."
However, Shanghai rose 1.08 per cent or 27.58 points to 2,583.52 due to expectations China will likely hold off on further tightening measures. Hong Kong was closed for a public holiday.
The bearish U.S. data and euro fears prompted fresh concern in Tokyo, with government officials fretting as investors piled into the safe-haven yen.
A strong Japanese currency is a worry for Japan due to its negative impact on the repatriated profits of exporters who are currently driving the country's recovery from its deepest post-war recession.
Japanese Finance Minister Naoto Kan said Friday that the "excessive rise of the yen was not desirable", as the safe-haven currency rapidly strengthened.
"We want to monitor the situation so that the appreciation of the yen will not become excessive," he told a news conference. However, after meeting Prime Minister Yukio Hatoyama he later said there were not concrete plans to deal with the situation immediately.
Against the dollar, the Japanese unit hovered around 90.22 yen, sharply up from 91.39 yen seen in Tokyo Thursday afternoon.
The yen's sharp rise prompted the Bank of Japan to inject one trillion yen (11.11 billion dollars) into the short-term money market to increase liquidity.
A rollercoaster week for the beleaguered euro continued with the currency recovering from four-year lows to fetch 1.2591 dollars in Tokyo trade, while it edged up slightly against the yen to 113.61 from 111.97 in New York.
The Nikkei was helped slightly by comments from the central bank that it saw signs of "moderate" recovery in the world's number-two economy, while keeping its key interest rate unchanged at 0.1 per cent.
The Bank of Japan said "the economy is likely to be on a recovery trend," thanks to the country's rising exports, driven particularly by emerging Asia.
It also announced details of a scheme to encourage commercial banks to lend to companies in growth industries to strengthen growth as the country battles deflation and weak domestic demand.
A European task force was due to hold its first meeting Friday to beef up economic and budgetary surveillance in member states as global markets continue to doubt Europe's unity in the face of the crisis.
Germany unilaterally banned certain speculative trades in an effort to calm markets only to see volatility spike due to the surprise the move created.
International Monetary Fund head Dominique Strauss-Kahn has said there was no risk of the 16-nation eurozone splintering but warned the crisis could cost Europe its credibility.
The crisis in Europe is being driven by debt and public deficit levels which have soared way above EU rules as governments increased spending to get their economies through the downturn.
Markets remain concerned despite a near-trillion-dollar package to prevent the troubles of debt-ridden Greece spreading.
Doubts over the strength of the U.S. recovery grew after the Labor Department said initial jobless claims totalled 471,000 in the week ending May 15, up 5.6 per cent from the previous week.
A bill to enact the most sweeping overhaul of financial industry rules since the Great Depression of the 1930s and curb Wall Street excesses also passed a key hurdle Thursday in the U.S. senate in a victory for President Barack Obama.
Oil was lower. New York's main contract, light sweet crude for July delivery, was down 28 cents to 70.52 dollars a barrel and Brent North Sea crude for July sank 62 cents to 71.22 dollars.
Gold was at 1,175.60 U.S. dollars an ounce in Hong Kong late trade, sharply down from Thursday's close of 1,192.00 dollars.
In other markets:
— Singapore ended down 1.90 per cent, or 52.31 points, to 2,701.20.
DBS tumbled 32 cents to 13.60 Singapore dollars, Singapore Telecom dropped seven cents to 2.86 and Singapore Airlines shed 24 cents to 14.16.
— Taipei fell 2.51 per cent, or 186.72 points, to 7,237.71.
The loss came despite data showing the island's biggest quarterly growth in 30 years.
Hon Hai fell 2.24 per cent to 131.0 Taiwan dollars while Taiwan Semiconductor Manufacturing Co was 0.17 per cent lower to 58.8.
— Manila closed 1.07 per cent, or 34.44 points, lower at 3,179.36.
Metropolitan Bank and Trust Co. fell 2.65 per cent to 55 pesos while Aboitiz Equity Ventures Inc. slipped 1.42 per cent to 17.25 pesos.
Philippine Long Distance Telephone Co. rose 0.41 per cent to 2,460 pesos.
— Jakarta lost 2.64 per cent, or 71.03 points, to 2,623.22.
— Kuala Lumpur closed down 1.41 per cent, or 18.43 points, at 1,285.73.
Food and beverage firm F&N lost 2.20 per cent to 11.50 ringgit and leading bank CIMB shed 3.0 per cent to 6.86.
— Wellington dived 1.97 per cent, or 61.34 points, to close at 3,050.08.
The market is at its lowest level since August 21 last year.
Telecom fell six cents to 1.99 dollars.
— Bangkok was closed for a second straight day Friday as the Thai capital clears up after deadly clashes between anti-government protesters and security forces earlier in the week.
