Asian stocks fell on Friday, halting a four-day rally, after weak US housing and jobs data and volatility in the financial sector once again reminded investors of the fragile state of the global economy.
Oil edged up from a seven-week low to around $125.50 a barrel, though the view that US energy demand is deteriorating is keeping a lid on prices.
The dollar held below Thursday's one-month peak against the yen, while Japanese government bond prices rose as concerns about the global economy resurfaced.
Reports overnight fuelled fears Britain, the euro zone, Japan and the United States are sliding toward recession. German business sentiment this month suffered its biggest decline since the 2001 attacks in New York and Washington, while existing US home sales were at the lowest in a decade.
"With the continuing deceleration in the global economic backdrop, export-dependent Asian economies in general are poised for weaker growth," said Thomas Lam, senior Treasury economist with United Overseas Bank in Singapore.
"The negative spillover from the major economies on Asian growth tends to occur with a lag," Lam said, adding that weak US growth late last year is being felt in Asia now. Japan's Nikkei share average fell 1.65 per cent after finishing on Thursday at the highest since June 26.
Canon Inc was the second-biggest drag on the index, with its shares down 3.4 per cent after the company on Thursday posted a 12 per cent fall in quarterly profit.
Shares in the Asia-Pacific region excluding Japan dropped 2 per cent after hitting the highest level in more than three weeks the previous day, an MSCI index shows. It is down 20 per cent this year.
South Korea's KOSPI slid 1.5 per cent, led by shares of Samsung Electronics after the world's largest memory chip maker posted a lower-than-expected rise in second-quarter profit. An executive with the company said a third-quarter recovery was unlikely.
Australia's benchmark index fell 3 per cent as National Australia Bank Ltd shares dropped more than 12 per cent, which if maintained to the close would be their biggest single-day decline since September 2001.
The firm booked A$830 million ($798 million) in additional losses as a result of exposure to bad US loans.
