Japan's broad TOPIX stock index slid to a 25-year low on Friday after a warning from General Motors
World stocks struck a six-year low <.MIWO00000PUS> on the drop in Japan, which was led by shares in the country's big exporters and banks, with investors spooked after shares in Citigroup
European stocks were set to open steady or dip slightly, according to financial bookmakers, as investors braced for what was expected to be a grim U.S. jobs report later in the day.
I'm worried about America, and the place where we can place our hopes now is China, said Yoku Ihara, manager at Retela Crea Securities in Tokyo, adding that he was concerned about the progress of the U.S. economic stimulus plans.
Asian equity markets held up better than their counterparts in the United States and Europe, thanks partly to hopes that China will boost its planned $585 billion in infrastructure spending to help offset the damage from collapsing exports.
China's central bank chief, Zhou Xiaochuan, said on Friday that he sees signs of the economy recovering and officials would err on the side of acting sooner rather than later to revive growth in the world's third largest economy.
The dollar retreated and oil prices climbed in a slight reversal of Thursday's moves sparked by the stock market slide, while Japan's woes pushed investors into safe-haven government bonds.
Japan's TOPIX <.TOPX> shed 2.7 percent to hit its lowest since December 1983, while the Nikkei <.N225> lost 3.5 percent to be less than 200 points above a 26-year low hit last October.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> was down 0.5 percent. Australia <.AXJO> fell 1.4 percent and Hong Kong <.HSI> shed 1.6 percent.
On Thursday, the U.S. S&P 500 <.SPX> tumbled 4.3 percent.
If you see fire breaking out in someone else's house, it causes worries about your own, too. The latest development in the U.S. corporate sector is very worrisome, said Y.S. Rhoo, a market analyst at Hyundai Securities in Seoul.
The deepening sell-off in major stock markets came ahead of the U.S. payrolls report at 8:30 a.m. EST, which is expected to show companies slashed 648,000 jobs in February, taking layoffs in the last four months to 2.4 million -- more than double the number of jobs created altogether in 2007.
The unemployment rate is forecast to hit a 25-year high of 7.9 percent.
The European Central Bank and Bank of England chopped interest rates to record lows on Thursday as they struggled to pull their economies out of a tailspin.
The BoE went a step further, saying it will print money to buy 75 billion pounds worth of government bonds as central banks try to limit the damage from the financial crisis and sharpest recession in decades.
But Merrill Lynch analysts said in a research note that there were several signs that Asia's economies were starting to stabilize, including a recovery in Chinese manufacturing and Korean exports to China.
Highlighting the see-saw nature of Asia markets, the South Korean won -- the most battered of regional currencies -- recovered to post gains on the day after initially falling to an 11-year low.
For a graphic on how Asian markets have outperformed the U.S. and Europe since hitting bottom in November, see:
DOLLAR DIPS, JGBS GAIN
The dollar index, a gauge of its performance against six major currencies, dropped 0.7 percent to 88.418 <.DXY> and retreated from a three-year peak reached this week as market players cut long positions before the jobs report. The euro climbed 0.8 percent to $1.2643.
Oil prices also pushed higher after tumbling 4 percent on Thursday on worries about demand as the deep global recession drags on. U.S. crude oil futures edged up 72 cents to $44.33 a barrel.
Safe-haven buying helped nudge the benchmark 10-year Japanese government bond yield down 2 basis points to 1.290 percent.
But U.S. Treasuries surrendered gains. The 10-year Treasury note fell 11/32 in price to yield 2.853 percent, up about 4 basis points from late U.S. trade.
Gold climbed $6.80 to $938.80 an ounce after rising more than 2 percent in the previous session.
(Additional reporting by Jungyoun Park in Seoul and Aiko Hayasih in Tokyo; Editing by Kim Coghill)