Asian stocks fell on Wednesday and ended the second quarter with their worst performance since the collapse of Lehman Brothers as investors got out of shares and high-yielding currencies on concerns over bank funding in Europe.
Asian stocks have slipped nearly 10 percent in the past three months and are on course for their worst quarterly performance since last three months of 2008, when investors fled to safety after the Lehman collapse and Asian shares dropped 23 percent.
European shares are set to open mixed, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE> to open 0.1 percent down, Germany's DAX <.GDAXI> to open 0.2 percent up, and France's CAC-40 <.FCHI> to open almost flat.
The MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> dropped 0.7 percent. Japan's Nikkei average <.N225> fell 2 percent to a seven-month low after breaking below a support level.
South Korea's benchmark KOSPI <.KS11> fell 0.6 percent, driven by falls in exporters and banks such as Hynix Semiconductor Inc <000660.KS> 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 ($546 billion) in emergency loans sparked the latest sell-off in equity markets, with the Standard & Poor's 500 Index <.SPX> tumbling more than 3 percent to an eight-month low. <.N>
Risk reduction was fueled by a report that showed a slump in U.S. consumer confidence. [ID:nN29138077]
Chinese stocks <.SSEC> fell 1.2 percent, extending a 4 percent slide on Tuesday to a new 14-month low, as tight 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 edged up but stayed near recent lows, after a heavy round of leveraged trade unwinding, while the euro was also within range of a record low on the haven Swiss franc.
The euro got a bit of a lift from light short-covering from Middle East investors and an Asian investor, one dealer said, but chartwise needed to hold above $1.2145-55 and then $1.2110 to avoid a slide toward its four-year low at $1.1876.
The euro edged up 0.2 percent to 108.15 yen but remained well within sight of its 8- year low of 107.30 yen on trading platform EBS struck on Tuesday.
Against the Swiss franc, it clawed 0.2 percent higher to 1.3213 francs after hitting a lifetime low of 1.3165 on Tuesday.
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.