The euro fell to a six-week low against the yen on Thursday and Asian stocks were subdued after an unsuccessful German bond sale raised alarm that Europe's ever-worsening sovereign debt crisis is starting to affect even the continent's economic powerhouse.
Oil struggled and copper slipped further, a day after weak data from Europe, China and the United States stoked fears that the global economy may be heading for a recession that would dull demand for industrial commodities.
Germany's bond sale on Wednesday had one of the worst results since the launch of the euro, raising concern about the price Berlin may pay for its role as paymaster to a region racked by a crisis that has toppled governments in Greece and Italy.
We have been saying for a while that Germany was effectively the only sovereign in the euro zone, all the others were credits, said Russell Jones, head of global rates strategy at Westpac Bank in Australia, in a note.
This may no longer be the case. And that is extremely worrying. We are journeying more and more into uncharted waters here.
Tokyo's Nikkei share average fell 1.4 percent, partly catching up with losses elsewhere on Wednesday, when Japanese markets were closed for a holiday.
MSCI's broadest index of Asia Pacific shares outside Japan swung back and forth between gains and losses for the first few hours of trading before clawing back some of the previous session's lost ground to stand up 0.7 percent.
Mining shares, the big losers in a sell-off on Wednesday, were the main factor in dragging the index back into the black.
Wall Street shares fell more than 2 percent on Wednesday, and world stocks fell to a six-week low, on data showing slowing factory output in manufacturing titans China and Germany and weak consumer spending in top consumer the United States.
U.S. markets will be closed on Thursday for the Thanksgiving holiday.
Germany's bond sale added to the gloom, knocking the euro down 1 percent. Depressed yields in Europe's last safe haven played a part, but analysts warned it also signaled a broader shunning of the region's financial system.
The other part is that market makers don't want to have a position because of the very distressed nature of financial markets as a whole, said Marc Ostwald, strategist at Monument Securities. There's certainly a partial element of 'they would rather not have euros' in there.
The single currency tottered to around $1.3370, up around 0.2 percent on Thursday, having fallen as low as $1.3318 in the previous session.
But against the yen it fell around 0.2 percent to a six-week low just below 103.0.
Safe-haven demand for the yen also pushed down the yield on 10-year Japanese government bonds, which dipped half a basis point to 0.960 percent.
The inexorably widening euro zone crisis -- which has pushed up risk premiums for Spanish, French, Italian and Belgian government bonds -- is making it increasingly hard for European banks to access dollar funding in the money markets.
The stresses pushed dollar LIBOR rates, the benchmark for banks lending to each other, up for the 103nd straight session on Wednesday and has driven the cost of swapping euros into dollars to the most expensive levels since the global financial crisis in 2008.
In Asian credit markets the Asia ex-Japan iTraxx investment grade index saw spreads widen around 10 basis points, reflecting heightened risk aversion.
U.S. crude oil slipped 0.3 percent, falling below $96 a barrel, following on from a 2 percent slide on Wednesday, but Brent crude was a touch firmer.
London Metal Exchange copper fell more than 1 percent, extending its losses for November to around 10 percent, to a one-month low around $7,100 a tonne.
(Additional reporting by Ian Chua in Sydney and Umesh Desai of IFR in Hong Kong; Editing by Richard Borsuk)