Asian shares slid on Friday as mounting concerns about the health of European banks further threatened a global economic outlook already under strain from falling oil prices and slowdown in China and other emerging markets.
The prices of yen, gold and liquid government bonds of favored countries soared as investors rushed to traditional safe-haven assets.
"The markets are clearly starting to price-in a sharp slowdown in the world economy and even a recession in the United States," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.
"I do not expect a collapse of major financial crisis like the Lehman crisis but it will take some before market sentiment will improve," he added.
Shares in Australia and South Korea fell about 0.5 percent though MSCI's dollar-denominated index of Asia-Pacific shares outside Japan was little changed due to the fall in the dollar.
Japan's Nikkei fell 3.3 percent to a fresh 15-month low as the yen soared to a 15-month high.
The strengthening yen touched 110.985 to the dollar on Thursday, rising almost 10 percent from its six-week low touched on Jan 29, when the Bank of Japan introduced negative interest rates.
The currency last stood at 112.38 yen.
Japanese Finance Minister Taro Aso stepped up his verbal intervention on Friday, saying he would take appropriate action as needed, but the yen hardly reacted.
MSCI's broadest gauge of stock markets fell 1.3 percent on Thursday to 353.35, hitting its lowest level since June 2013. So far this year it is down 11.5 percent.
It has fallen fell more than 20 percent below its record high last May, confirming global stocks are in a bear market.
On Wall street, the U.S. benchmark S&P 500 fell 1.23 percent to 1,829.08, its lowest close in almost two years and down 10.5 percent for the year.
The FTSEurofirst 300 index of top European shares sank 3.7 percent to its lowest level in 2-1/2 years.
Financial counters led the losses globally as disappointing earnings from Societe Generale added to the gloomy mood brought on by poor results from Deutsche Bank last month.
Banks in Europe ended 6.3 percent lower, while the S&P financial index dropped 3 percent.
Stress in the financial sector is stoking worries that funding conditions for some companies may tighten even as many of the world's central banks pump in funds through unorthodox measures.
A funding drought could be a death knell for some energy firms that have struggled to make ends meet as oil trades at around a quarter of its value just a few years ago.
In a worrying sign that Europe's debt problems could reappear, the Portuguese 10-year bond yield surged above four percent for the first time since 2014.
That is a clear departure from last year when investors, hunting for yield, were buying up debt from Portugal and other indebted countries.
In contrast, investors are now flocking to more liquid, and higher-rated bonds.
The 10-year U.S. Treasuries yield fell to as low as 1.530 percent, a low last seen in August 2012, which is just before the Fed started its third round of quantitative easing. It stood at 1.657 percent in early Asian trade.
Federal funds rate futures almost completely priced out the chance of a rate hike.
Gold surged to one-year high of $1,262.90 per ounce on Thursday, rising over 4 percent in its biggest daily percentage gain since September 2013. It last stood at $1,238.1.
U.S. crude futures hit a fresh 13-year low of $26.05 per barrel on a rise in U.S. stockpiles, though they managed to pare losses in volatile trade later in the day.
In early Asia, they traded at $27.33.
(Reporting by Hideyuki Sano; Editing by Eric Meijer)