Asian stocks took a beating Thursday, after Wall Street closed at a three-month low, sparking fears of a pullback in export demand with oil prices remaining high and feeding a rally in safe-haven government bond prices. Japan shed 2.2 percent while Australia gave up 1.4 percent.
The U.S. dollar was down for a fourth straight day against major currencies as expectations for higher interest rates from the Federal Reserve continue to be doused by evidence the U.S. economy may not have hit bottom yet.
Crude oil rose $2.67 a barrel to settle at $136.68 a barrel in the New York session Wednesday after the EIA reported that crude inventories shrunk by 1.2 million barrels last week, less than the 1.5 billion draw expected. Oil is currently trading at the $135 level in the Asian session.
Tokyo's Nikkei 225 Average closed down 2.2 percent led lower by exporters such as Honda Motor on a firmer yen and worries about a weak U.S. economy, a major destination for world exports. Toyota Motor slid after the automaker said it was cutting U.S. production of its full-size pickup trucks further this year as record gasoline prices have depressed sales of gas-hungry trucks and SUVs.