Asian stocks slid and the euro struggled near a two-week low on Wednesday as investors unwound risky positions before the quarter-end amid heightened concerns over banks' funding conditions in Europe.
Asian stocks, which have slipped nearly 10 percent in the past three months, are on course for their worst quarterly performance since the end of 2008, when global investors fled to safety after the collapse of Lehman Brothers.
The MSCI index of Asia Pacific shares outside Japan dropped 1 percent. Japan's Nikkei average fell 1.8 percent to a seven-month low after breaking below a key support level.
South Korea's benchmark KOSPI fell just over 1 percent, driven by falls in exporters and banks such as Hynix Semiconductor Inc and Shinhan Financial Group Co.
Given that the market has risen pretty sharply since late May, I am not overly alarmed by the size of falls we are seeing today, said Choi Seong-lak, a market analyst at SK Securities. KOSPI has gained 8 percent in the past month after hitting a six-month low on May 25.
Fears of a potential liquidity shortfall of more than 100 billion euros in the financial system as European banks repay 442 billion euros ($545.5 billion) in emergency loans sparked the latest sell-off in equity markets, with the Standard & Poor's 500 Index tumbling over 3 percent to an eight-month low.
Risk reduction was fueled by a report that showed a slump in U.S. consumer confidence.
Chinese stocks fell 1 percent, extending a 4 percent slide on Tuesday to a new 14-month low, as tight local-market liquidity forced investors to sell shares to make room for a major initial public offering by Agricultural Bank of China.
EURO OUTLOOK SHAKY
The euro held near $1.2200, not far from a two-week low of $1.2152 hit in the previous session. Technical analysts noted $1.2150 as a key level, saying a break below it could open the way for test to as low as $1.1875, a four-year low set on June 7.
The European currency was at 107.91 yen, not far from its 8- year low of 107.33 yen struck on Tuesday. Against the safe haven Swiss franc, it hovered near record lows of 1.3167 francs.
The Australian and New Zealand dollars were stuck to two-week lows as sharp losses in stocks and commodities benefited safe havens like gold and U.S. treasuries.
The yield on the two-year U.S. Treasury note fell to the lowest on record on Tuesday, while the yield on the benchmark 10-year Treasury slid below 3 percent for the first time since April 2009, and interbank euro funding costs hit an eight-month high.
Oil prices fell as much as 61 cents to $75.33 a barrel, heading for its first quarterly drop since 2008 as risk aversion caused by Europe's debt crisis offset rising demand in the United States and China, the world's top two consumers.
Meanwhile, spot gold rose $3.65 to $1,241.65 an ounce, heading for its seventh quarterly rise and its biggest increase since end-2007, as investors rushed for safety from tumbling stock markets.