Asian stocks dip as global economic growth fears return
Last Updated at 14:48 GMT
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Asian stocks have fallen after fears about a global economic slowdown were fanned by weak US data.
South Korea's Kospi dropped 6.2%, Japan's Nikkei 225 fell 2.5% and Australia's ASX shed 3.5%.
Investors are worried global growth is slowing more than first thought, and are concerned that major economies are heading back into recession.
The falls follow steep losses in the US and Europe on Thursday, and mark a week of stock market declines.
Concerns over growth and debt have been building over recent weeks and financial markets have been seeing extreme volatility.
Many analysts are questioning if a bear market - one in which the long term trend is negative - has now developed and is here to stay.
"Bear markets tend to happen when sentiments are low and that comes from weakened demand and bad news flow," Chou Chong of Aberdeen Asset Management told the BBC.
"The Western regions are having to face a period of lower growth and dampened demand. That is putting pressure on market sentiment." he added.
A number of industry heavyweights such as computer firm Dell have cut their earnings outlooks in recent days. At the same time, investment banks including Morgan Stanley have been revisiting their growth forecasts for this year.
On Thursday, Morgan Stanley said that the US and Europe were "dangerously close to recession", despite efforts by policymakers to boost growth and calm markets.
"Investors fear that policymakers no longer have the tools to avoid a recession," Frederic Neumann at HSBC in Hong Kong told the BBC's Asia Business Report.
What sparked the sell-off in stocks was Thursday's release of data on the US economy.
Manufacturing activity in the US's mid-Atlantic region slumped to its lowest level since March 2009, according to data from the Philadelphia Federal Reserve Bank, which is seen as an early indicator of the state of manufacturing nationally.
At the same time, sales in the US housing market fell unexpectedly and unemployment claims rose sharply.
The numbers weighed on sentiment in both the US and Europe.
"The issue now is there is building evidence that the economies themselves are weakening," Mr Neuman said.
"We are shifting from a policy risk concern to a realisation that the economies are not as strong as we believed and that is something that the investors have only begun to wake up to right now."
Mr Chong of Aberdeen Asset Management warned that given the uncertainty surrounding the health of the developed economies, markets were likely to remain volatile.
"Until we do see the US and Europe find a long-term sustainable solution to their growth and debt problems, markets will react to any near-term noises," he said.
The Dow Jones index closed down 3.7% while European indexes lost between 4% and 6%.
On Friday, oil prices continued to drop as investors bet that slower global growth would dent demand for crude.
"Investors have been spooked," said Yumi Nishimura of Daiwa Securities, adding that markets would be looking for more clues as to the state of the global economy.
"They are now focusing on next week's data such as US gross domestic product," she said.
Analysts said oil prices were likely to take further hits in the wake of the global economic developments.
"The world economy has clearly stalled and it is hard to see any meaningful recovery in demand unless commodity prices, and especially oil, continue to weaken," Capital Economics said in a report.
"The fragility of the world economy means there is high chance that fresh financial shocks will trigger more falls in commodity markets."
Amid the worries about the state of the global economy, so-called safe haven investments continued to rise in Asian trade, extending Thursday's sharp increases.
The spot price of gold hit a new record high of $1,833.81 an ounce.
The Swiss franc rose against the euro, despite recent attempts by the Swiss authorities to weaken it earlier this month.