JANUARY 21 2008 08:11h
MSCI´s All Country World Index fell 0.7 percent by 0629 GMT -- its lowest level since August.
Worries about the world's top economy kept the dollar within striking distance of a near three-year low against the yen as investors unwound risky currency carry trades, while the euro and sterling also fell.
European stock markets are expected to open lower, with financial bookmakers in London forecasting Britain's FTSE 100, Germany's Dax and France's Cac-40 forecast to open 0.5-1 percent lower.
MSCI's All Country World Index fell 0.7 percent by 0629 GMT -- its lowest level since August.
The index has fallen 10 percent since the start of the year as the credit crisis continues to draw out news of massive write downs for banks and financial institutions around the world and signs of a slowdown in retail sales.
Last week President George W. Bush called for package of tax cuts and other measures of $140 billion to $150 billion to shore up the U.S. economy, battered by the subprime mortgage crisis and subsequent credit crunch.
But the move did little to reassure stock markets and some investors were expecting a global equity bear market.
"Over the last two years investors have been driven by greed, we're now seeing investors being driven by risk and in both directions, and that can make them irrational," said White Funds Management portfolio manager Angus Gluskie.
Tokyo's benchmark Nikkei ended down 3.9 percent. The index has shed a quarter of its value since July, when concerns that the U.S. subprime mortgage crisis would permeate global financial markets first reared their head.
Banks extended recent losses on fears they will reveal more credit-related losses, with Mizuho Financial Group down around 5 percent.
In Hong Kong, Bank of China slid 4.7 percent after a newspaper reported the lender is expected toannounce a major write-down of its failed investments in U.S. subprime mortgage securities in the fourth quarter.
In Seoul worries over the outlook for the United States -- a top export market -- hit stocks like flat screen maker LG.Philips LCD Co Ltd The benchmark Korea Composite Stock Price Index closed down 1.3 percent -- its biggest daily fall in 2 months.
Australia's S&P/ASX 200 index fell 2.9 percent to its worst level since January 2007. The index has fallen for 11 straight sessions -- its longest losing run in more than a quarter of a century.
MSCI's index of ASia Pacific shares outside of Japan was down 3 percent.
Japan's yen held gains against the dollar, supported by an unwinding of risky positions as continuing losses in Japanese stocks kepts investors alert to the possibility of a U.S. recession and its potential effect on other economies.
"There's no change in the momentum to sell the dollar," said Hideki Amikura, a forex manager at Nomura Trust and Banking. "More Nikkei losses are likely to push the dollar/yen lower."
By 0631 GMT the dollar traded at 106.68 yen little changed from late last week, when it fell as low as 105.92 yen, its lowest since May 2005.
Both the euro and sterling fell versus the dollar on worries the European and British economies will slow along with the United States.
Japan's March 10-year futures hit a two-year high with a 0.33 point to 138.46. The five-year yield fell 3.5 basis points to 0.820 percent, the lowest since January 2006. JGB investors are speculating that the Bank of Japan's next policy move may be to cut interest rates if Japan suffers from the troubles abroad.
Oil steadied below $91 a barrel, with prices supported by the closure of Mexico's oil export terminals due to bad weather, as well as OPEC's dismissal of calls to raise output.
U.S. light crude for February delivery was unchanged at $90.58 a barrel in Asian trade.
Among metals, gold edged lower as Bush's tax cut plan failed to inspire buying. Spot gold was trading below $880 an ounce, down from $882 in New York on Friday.