Asian stocks were hammered on Friday as mounting fears over Europe's debt crisis sparked a global market rout that sent safe-haven assets soaring and clobbered sterling.
A near 1,000-point plunge in the Dow Jones Industrial Average at one stage, led some investors to recall the mayhem in world markets after the collapse of U.S. bank Lehman Brothers in 2008.
Sterling was especially hard hit overnight as it suffered a further dose of uncertainty from exit polls that showed no one UK party may hold a majority in parliament. [ID:nLDE6452N3] It shed 12 yen against the safe-haven Japanese currency at one point.
The wild swings in prices forced some traders in Asia to work from home early Friday or get to work earlier than usual.
The Greece debt crisis is reminding investors of what happened after Lehman Brothers' collapse, said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
A failure by one financial institution ended up triggering a ripple effect on the global economy.
The Greek parliament backed an austerity plan on Thursday, but selling had accelerated across markets overnight after the European Central Bank said it had not considered buying government bonds to ease Greece's debt crisis. Some investors had hoped it would be more active in calming markets.
That kept the euro languishing near 14-month troughs. It was weak at $1.2661 on Friday, crawling back from New York's close of $1.2605 but still far below last week's $1.3295 finish.
Japan's Nikkei <.N225> skidded nearly 4 percent, its worse day in slightly over a year.
Exporters were hard hit, hurt by a soaring yen that leapt nearly 4 percent in New York trade as investors rushed to buy safer assets.
Digital camera maker Canon lost 4.7 percent and chip-tester maker Advantest Corp <6857.T> shed 4.8 percent. Automaker Honda Motor Co <7267.T> skidded 4.1 percent.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slumped 2.4 percent, its biggest daily fall in three months.
The dash for safety pushed gold to near record highs and 10-year U.S. Treasury yields to five-month lows.
However, while bond yields dived borrowing costs between banks jumped, another echo of the global financial crisis.
This brief rerun of the darkest days of 12-24 months ago is a real confidence killer for leveraged investors, not to mention the rest of us, said Rory Robertson, an interest rate strategist at Macquarie in Sydney.
The real worry is that the growing risk aversion via growing problems in Europe is driving up funding costs across the global financial system.
The U.S. dollar pared losses slightly against the yen to trade at 90.78 yen, from 90.17 in New York, but that compared to 93.80 this time Thursday. It shed five whole yen at one point on Thursday.
The dollar index <.DXY> held near one-year highs at 84.9, as the U.S. currency gained elsewhere from the super safe-haven status of Treasuries.
U.S. stocks had dived as much as 9 percent at one stage on Thursday as losses triggered by Europe's debt crisis sparked a stampede of automated selling. There were investigations, however, about whether a trading glitch had magnified losses.
It was the craziest day I've ever had, said Mark Galorenzo, an options trader at TMT East, as he left the New York Stock Exchange on Thursday. It was worse than 2008 -- the market sold off faster and deeper.
In further evidence that Greece's debt crisis was spreading across Europe, data showed a net of outflow in excess of $2 billion from Europe equity funds in the week to May 5.
The rout in markets caused the VIX <.VIX>, Wall Street's favored gauge of investor anxiety, to spike to one-year highs in New York trade, a screeching turn from 33-month lows seen only in April.
That said, the VIX is still about 80 percent below peaks seen in 2008 at the height of the global financial crisis.
(Additional reporting by Tokyo and New York; Editing by Tomasz Janowski)