Asian stocks lost ground on Thursday, following yet another daily decline on Wall Street, with markets hit by signs that Chinese manufacturing activity is slowing.
China's official purchasing managers' index (PMI) fell to 52.1 in June from 53.9 in May, weaker than the median forecast of 53.1. The disappointing number added to jitters about the strength of the global recovery, giving nervous investors further impetus to exit equities.
Major U.S. indexes all ended down more than 1 percent overnight. U.S. data showed Midwest business activity grew slightly more than expected in June, but a private-sector report showed employment grew by only a paltry amount, adding to concerns about the health of the economy ahead of non-farm payrolls numbers on Friday.
Japan's Nikkei average fell 2 percent to close at a seven-month low as exporters slid, extending losses a day after it posted its worst quarter since the 2008 market turmoil caused by the fall of Lehman Brothers.
Market players cited an increase in risk aversion underscored by worries about the pace of the U.S. economic recovery. A better-than-expected survey of domestic corporate sentiment was overshadowed by worries about a slowdown in China's manufacturing sector.
Japanese manufacturers turned optimistic about business conditions for the first time in two years, a Bank of Japan tankan survey showed, as solid exports to Asia supported the country's economic recovery.
The benchmark Nikkei shed 191.04 points to 9,191.60, its lowest close since late November. It fell as low as 9,147.68 at one stage.
The broader Topix fell 1.6 percent to 828.39.
Exporters suffered, with high-tech stocks hitting multi-month lows, hurt in part by worries about a stronger yen. Sony fell 3.6 percent to 2,296 yen, its lowest in seven months.
Separately, Sony said on Wednesday about 535,000 units of its "Vaio" brand personal computers globally may be in danger of overheating and that it has provided software on its website to eliminate the problem.
Kyocera also touched a seven-month trough, falling 3.4 percent to 7,010 yen, while Advantest slipped 3.3 percent to 1,821 yen, its lowest in nearly a year.
Toyota Motor retreated 2.2 percent to 3,010 yen after the Nikkei business daily said the automaker is considering a recall of one of its top-of-the-line sedans, Lexus LS460, owing
to concerns that its engines may stall.
Seoul shares also declined, with the country's stronger-than-expected export numbers eclipsed by disappointing Chinese data.
The Korea Composite Stock Price Index (KOSPI) finished 0.7 percent at 1,686.2 points. The index touched 1,664.5 at one stage.
South Korean exports in June grew more than expected over a year earlier despite fears that debt problems in Europe may have started curbing global demand.
Shares in Hyundai Motor sank 5.19 percent after a report that its parent group may bid for a $2.1 billion stake in Hyundai Engineering & Construction.
"The acquisition report is weighing on sentiment ... Financial burden probably is not an issue. It has more than enough cash buy ... But Hyundai Motor also already has a construction unit, Hyundai Amco," said Choi Dae-sik, an analyst at HI Investment Securities.
Kia Motor, also a unit of Hyundai Motor Group, declined 3.36 percent, while Hyundai Merchant Marine jumped 4.7 percent.
"There are vague expectations about how Hyundai Merchant Marine will be dealt with, as Hyundai Engineering's stake is quite big," said Jee Heon-seok, an analyst at NH Investment &
Securities. "Some optimistic investors seem to be betting on Hyundai Motor's taking over the stake."
Hyundai Engineering controlled 7.22 percent of Hyundai Merchant Marine, according to a regulatory filing in May.
LG Display retreated amid growing concerns about its quarterly earnings, with shares of the world's No.2 maker of flat panels down 4.7 percent.
Australian shares fell 1.5 percent to an 11-month low, as investors continued to fret over global growth prospects.
A media report that the Australian government had given ground on key elements of the hefty new mining tax helped the mining sector recoup nearly half its losses.
The benchmark S&P/ASX 200 index lost 64 points to close at 4,237.5.
New Zealand's benchmark NZX 50 index fell 1.3 percent to 2,933.8.
Miners and banks came under pressure but came off the day's lows, with BHP Billiton down 1.4 percent, Rio Tinto down 2.34 percent.
The country's banking stocks fell between 1-2.5 percent. Investment bank Macquarie ended down 1.8 percent after hitting a fresh one-year low of A$35.92 earlier on lingering worries about its growth prospects.
The day's biggest gainers were the stocks that underperformed the most over the past month, including rural services firm Elders and timber products group Gunns.
Mosaic Oil surged 67 percent to A$0.13 after AGL Energy, Australia's biggest energy retailer, made a A$123 million ($103 million) cash takeover offer for the group.
Asciano also outperformed the market, after the rail and ports group won a coal transport contract in Queensland, picking up market share against the market's dominant coal transporter, state-owned QR National.
In the greater China region, Taiwan stocks lost 1 percent. A slower pace of growth in Chinese manufacturing weighed on Taiwanese firms, many of whom export components for manufacturers in China.
The island's ceramics and plastics producers led the way down, while PC maker Asustek slumped 6.8 percent, giving back some of its heavy gains after restructuring. But transport stocks gained, offering some support.
The TAIEX index stood 39.39 points lower at 7,254.0, after losing 1.3 percent on Wednesday, ending the second quarter down 7.5 percent. That came on top of a 3.3 percent fall in the first quarter.
Taiwan Glass fell 4.2 percent and Formosa Plastics declined 2.6 percent.
Among transport stocks, Evergreen Marine climbed 2.4 percent after a newspaper report that it would add a surcharge to European routes from this month in part to counter the effects of the weak euro.
China's key stock index fell 1 percent to its lowest close in 15 months, extending a downtrend in the first half of the year as a stream of share supply, including a Agricultural Bank of
China's huge IPO, outpaced demand amid slow money inflows due to weak sentiment.
The market largely brushed aside data that showed slowing growth in China's manufacturing sector but mining and resources companies still dominated the list of losing stocks this session, as China's purchasing managers' index showed a slowdown in the sector.
The Shanghai Composite Indexended at 2,373.8 points, its lowest close since April 2009, after posting its biggest quarterly loss in more than two years on Wednesday.
Zhongjin Gold was the leading laggard, losing 5.0 percent.
Financial markets in Hong Kong are closed for a public holiday.
Singapore's Straits Times Index slipped 0.5 percent in cautious trade amid worries about the health of the U.S. economy and Europe's debt problesm.
Singapore-listed China Animal Healthcare rose as much as 6.7 percent to S$0.32, after the manufacturer and distributor of drugs for livestock, announced it had appointed Macquarie Capital as its sponsor for a planned dual listing in Hong Kong.