Asian stocks fell to near five-month lows on Friday as investors dumped riskier assets after rising sovereign debt problems in the euro zone and poor jobs data sent U.S. and European stocks tumbling.
The U.S. dollar climbed, having surged in the previous session, after investor anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the euro and growth-linked currencies such as the Australian dollar.
Asia Pacific stocks outside Japan as measured by MSCI fell 2.1 percent to levels last seen in mid-September. Declines were led by resource stocks, which fell more than 3 percent as commodity and energy prices fell on worries about the strength of the global economic recovery.
Japan's Nikkei average <.N225> fell 3 percent to its lowest in seven weeks.
Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong, said worse may lay ahead for Asian stocks in the second quarter.
He said the waning impact of fiscal stimulus measures in big economies would trigger a double-dip recession in the United States, Europe and Japan by the end of the year, and that markets would see it coming.
When it comes to equities, markets usually anticipate changes in the direction of the global economy about two quarters before they occur, Kowalczyk said.
Obviously when you look at what's happening with the market this year, some might say the correction has already begun. But I think this correction, while it is painful, is not the major one that will come ahead of the double dip.
Asian stocks outside Japan have fallen more than 8 percent this year after rising 68 percent in 2009 on the back of government measures worldwide that stimulated spending and dragged the global economy back from the abyss.
Australian shares tumbled 2.6 percent, with top miners and banks sliding. Rio Tinto
Major U.S. stock indexes fell as much as 3 percent overnight, their worst losses in more than nine months, with the Dow <.DJX> briefly dipping below the significant 10,000 mark. <.N>
Financial, commodity and materials sectors were all hit hard by fears of escalating government debt problems in Greece, Portugal and Spain.
An unexpected rise in U.S. unemployment benefits also spooked Wall St, heightening concerns ahead of the non-farm payrolls data due later on Friday.
In Asian trade, the dollar index <.DXY> surged past 80 for the first time since mid-July 2009 while the euro fell to as low as $1.3716, which was its lowest since May, 2009.
The weakness in the euro was partly attributed to widening Greek, Portuguese and Spanish bonds' yield spreads over German benchmarks.
Shanghai copper was seen falling around 3 percent after a plunge in London sent the metal to its lowest in more than three months.
U.S. crude oil futures hovered around $73 a barrel after posting their steepest one-day percentage fall since July the previous day when the dollar soared and demand concerns resurfaced.
(Editing by Kim Coghill)