Asian markets headed sharply lower early Thursday over mounting concerns about the health of Europe's banks and France's debt rating.
Japan's Nikkei 225 index sank 1.5 per cent to 8,923.25, wiping out gains of the previous day. South Korea's Kospi index lost 0.7 per cent to 1,793.77 and Hong Kong's Hang Seng index stumbled 1.5 per cent to 19,489.03.
On Wall Street, the Dow Jones industrial average closed down 519 points, with selling largely spurred by worries about Europe. American bank stocks took hits because investors fretted that debt problems overseas might reach the United States.
France came under pressure amid concerns that it could follow the US and become the next country to lose its top AAA rating. Standard & Poor's rating agency stripped the US of its AAA credit rating late last week, sending global stocks into a tailspin.
On Tuesday, the Federal Reserve said it planned to keep interest rates ultra-low for two more years since it sees almost no chance that the US economy will improve substantially by 2013.
The Dow closed on Wednesday at 10,719.94, down 4.6 per cent for the day. By points, it was the ninth-steepest decline for the market. The S&P 500 finished the day down 4.4 per cent and the Nasdaq composite index down 4.1 per cent.
Perspective: Markets grab Fed's olive branch
In Asia, meanwhile, a key concern is that higher inflation in China could lead to slower growth.
Inflation in the world's second-largest economy rose to a 37-month high in July, adding to pressure on Chinese leaders to cool living costs while keeping economic growth on track as the US and European outlook worsens.
Some analysts said upcoming jobs and retail sales data from the US later this week would offer a much needed respite from plummeting markets. Weekly jobless claims will be released later Thursday, followed by retail sales on Friday.
"Perhaps some actual data might calm things down? Jobless claims are on tap today and a good number ... would surely offer a bit of respite to markets," analysts at DBS Bank Ltd. in Singapore said in a report. Retail sales would be even "more likely to have a calming effect" given the recent surge in auto sales.