The Japanese benchmark Nikkei fell 0.29 percent or 25.72 points to 8,798.35 and South Korean KOSPI plunged 2.21 percent or 41.76 points to 1,847.39. Indian benchmark BSE Sensex fell 0.59 percent and Hong Kong's Hang Seng declined 1.40 percent or 269.94 points to 18,995.13 while Chinese Shanghai Composite was closed for holiday.
Concerns over a global slowdown resurfaced with further drops in China and euro zone PMI manufacturing and slump in the U.S. Philly Fed Index. Business activity in the euro zone region declined for a fifth straight month and Chinese manufacturing activity continued to contract for the eighth straight month.
The Philadelphia Federal Reserve Bank said that factory activity in the Mid-Atlantic region unexpectedly slumped to -16.6 in June from -5.8 in May, suggesting regional contraction in the manufacturing activity.
Data on housing also disappointed with sales of previously owned homes in the U.S. declined 1.5 percent to a 4.55 million annualized rate suggesting that the recovery in housing market demand has lost a bit of momentum while the number of Americans filing for first-time jobless benefits declined by 2000 to a seasonally adjusted 387,000 for the week ending June 16 but fell short of economists' expectations.
Markets are worried about the slowdown, not only in US figures but all around the world. The market was extremely overbought coming into this week, and the news gave it an excuse to sell off, Jeffrey Saut, chief investment strategist at Raymond James Financial, told Reuters.
Sentiment was further dampened after a bearish recommendation from Goldman Sachs on the S&P 500 index and news that Moody's Investors Service downgraded five U.S. banks, nine European banks and the Royal Bank of Canada. Goldman Sachs advised its clients to bet on the S&P 500 falling about 5 percent.
Financial stocks plunged across the region after Moody's Downgrade. HSBC Holdings Plc declined 1.17 percent and Agricultural Bank of China fell 1.32 percent in Hong Kong and KB Financial Group plunged 3.73 percent in Seoul while UFJ Financial Group declined 1.08 percent in Japan.
Resource companies' shares were also hit by plunge in commodities prices. Light sweet crude for August delivery plunged 4 percent Thursday to settle at $78.20 a barrel, the closing level since October, on the New York Mercantile Exchange.
Cnooc Ltd. slumped 4.01 percent and China Coal Energy plunged 3.44 percent in Hong Kong while Inpex Corp. declined 2.48 percent in Tokyo.
In India, Jaiprakash Associates plunged 4.76 percent and Hindalco Industries fell 3.71 percent.
Meanwhile, the rupee continued its downward slide for the fifth consecutive day Friday to set the record low of 57.33 against the U.S. dollar in the afternoon trading session. The increasing demand for the dollar from importers and the renewed global risk aversion contributed to the fall of the rupee.