Japan's Nikkei 225 Stock Average dropped 1 percent and closed at 9070.76. South Korea's Kospi Index declined 1.4 percent and closed at 1919.81. India's BSE Sensex gained 0.4 percent and closed at 17783.21.
Hong Kong's Hang Seng Index declined 1.2 percent and closed at 19880.03 and China's Shanghai Composite Index fell 1.1 percent and closed at 2092.10.
Investors felt that bold measures, including easing in the monetary policy, were urgently needed to boost liquidity in the global financial system. Lack of measures from the European Central Bank and the U.S. Federal Reserve weighed down market confidence.
The euro zone economy entered recession in the second quarter with the troubled economies of Spain and Italy seeing sharp falls in the GDP, hindering their fiscal consolidation efforts and deepening the region's debt crisis.
The Markit Flash Eurozone PMI Composite Output Index, released Thursday, indicated that the economic outlook was worsening. The August purchasing managers' index (PMI) for the euro zone gave further indication that the region was in recession. The headline composite index for August was 46.6, which was a very slight improvement from 46.5 in July.
Investor sentiment turned fragile as the market players continued to worry about the uncertainties in the euro zone. Market participants sensed that the euro zone crisis was also taking its toll on the rest of the world with activity slowing down in all major economies, including China and Japan, in the second quarter.
Japan reported Wednesday a rise in trade deficit in July compared to the previous month with a decrease in exports and an increase in imports. The Finance Ministry data showed that the country recorded 517.4 billion yen ($6.5 billion) trade deficit in July, down from 60.3 billion yen surplus in June. While exports dropped 8.1 percent to 5.31 trillion yen from a year earlier indicating the soft global demand, imports rose 2.1 percent to 5.83 trillion yen as the nuclear energy crisis resulted in the increased need of oil and gas.
There was a slump of 25.1 percent in exports to the European Union compared to the previous year. While exports to China dropped 11.9 percent, exports to the U.S. rose 4.7 percent. The continuing debt crisis in Europe and the tentative U.S. recovery have hurt the demand for exports, the key driver of Japan's economy.
China's manufacturing activity fell in August compared to that in July, according to the preliminary HSBC Flash PMI released Thursday. The preliminary reading of the PMI, a measure of the nationwide manufacturing activity, declined to 47.8 in August, which is a nine-month low, compared to 49.3 in July. The fall in the reading would increase fears of the likelihood of a sharp slowdown in the economy.
Major Losers: Shares of Nissan Motor Co declined 3.8 percent. Shares of Makita Corp dropped 2.6 percent and those of Aluminum Corp. of China Ltd fell 2.1 percent.
Week Ahead: Markets are expected to remain bearish with the hopes of stimulus measures by the central banks around the globe, especially the U.S. Federal Reserve and the ECB, to boost the respective economies.