Most Asian markets fell Friday after the Bank of Japan's less-than-expected rate cut halted a powerful three-day rally, sending safer havens such as regional bonds and the yen higher.
Regional shares are set to end October as their worst month on record -- worse even than during the Asian financial crisis a decade ago -- as global economies buckle under the weight of the biggest financial crisis since the Great Depression.
Policy makers have responded by cutting interest rates and injecting liquidity, but investors fear the measures may only have a temporary effect in what could be a severe and long-lasting global recession.
Oil prices dropped more than $1 a barrel on Friday after data showed the U.S. economy suffered its sharpest contraction in seven years in the third quarter, as consumers cut spending and businesses reduced investment. But the yen rose against the euro and the dollar , supported as investors unwind investments in risky assets that had been funded by borrowing the low-yielding yen.
The Nikkei 225 Average dropped 5 percent after the Bank of Japan cut interest rates for the first time in seven years, though the cut was by a split vote and was smaller than the market had expected. Exporters were hard hit with Honda Motor leading the declines, losing 13 percent. In the three-day rally to Thursday, the Nikkei gained nearly 30 percent. The broader Topix shed 3.6 percent to 867.12.
Seoul shares ended 2.6 percent higher extending the previous session's record 12 percent jump, lifted by gains in industrials including POSCO and Hyundai Heavy, but banks dragged on the index. The Kospi is down some 23 percent on the month but up 18.5 percent on the week, posting its biggest weekly gain ever.
Australian shares rose half a percent, reversing early losses as property firms such as Westfield Group gained and as other Asian markets trimmed losses.
Hong Kong shares fell 2.5 percent, with the index posting its worst monthly drop since Oct. 1997 as renewed fears over the global economy and the outlook for earnings snapped a three-day, 30 percent rally. Bank of Communications, China's No. 5 lender, fell as much as 9.4 percent after it said third-quarter profit growth slowed sharply from the first half. But property shares such as China Overseas Land remained firm after China lowered borrowing costs on Wednesday.
Singapore's Straits Times Index swung into the red with financial stocks such as DBS Group moving lower.
China's Shanghai Composite Index dropped 2 percent , the last day of the third-quarter earnings reporting season, as a slowdown in profit growth fueled pessimism over prospects for future quarters. Steel shares dragged down the index, with Baoshan Iron and Steel sliding. On Wednesday, it posted lower-than-expected profit growth for the third quarter and forecast losses in key product areas for the fourth quarter.