Asian shares fell for a third straight day on Wednesday as uncertainty over global growth prospects, and resurfacing worries about debt restructuring in the euro zone, prompted investors to continue trimming their risk exposures.
After a sharp drop in global equities overnight, Japan's Nikkei average opened down 1.5%, and MSCI's broadest index of Asia Pacific shares outside Japan was down 0.2%.
"For Q2, our strategy remains defensive," Standard Chartered Bank said in a research note. "US data is deteriorating, Europe is in recession and China is still slowing."
The benchmark Standard & Poor's 500 Index slid 1.71% on Tuesday, its worst day in four months, the same day European shares hit a 10-week low on the first trading day after the four-day Easter weekend.
The sell-off was triggered by Friday's data which showed a sharp slowdown in US jobs creation last month, along with Tuesday's data which suggested softening Chinese demand.
Worries about tepid global demand growth hit industrial commodities such as oil and copper but benefited gold and US and German government debt on investors' safety bids on Tuesday.
Asian credit markets took a hit from growing risk aversion, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 4 basis points on Wednesday.
Rising stress signs
The euro inched down 0.1% to $1.3073 while the dollar fell to a five-week low of 80.60 yen.
Benchmark 10-year US Treasury yields fell below 2% for the first time in over four weeks on Tuesday while resurfacing concerns about Europe's debt problems drove Spanish 10-year yields up to nearly 6%. Spanish bonds have been weighed by last week's weak debt sale.
Italian bond yields were also dragged higher ahead of a 5 billion euro bond auction on Thursday.
Rising premiums on the peripherals pushed German government bond yields lower, with the two-year yield at 0.098% undershooting the two-year Japanese debt yielding around 0.1%. German bond yields are lower than Japanese yields for the first time since January 1988, according to a Merrill Lynch report.
In another sign of rising stress in markets, the VIX index rose to a five-week high on Tuesday to end at 20.39, having jumped about 31% so far in April. The index, a key gauge of how investors perceive risk, measures expected volatility in the Standard & Poor's 500 index over the next 30 days, and its increase reflects growing risk aversion.
Greece will call a snap election for May 6 on Wednesday, government officials said, launching a campaign that may produce no clear results and risk implementation of the bailout plan that saved Athens from bankruptcy.
Oil suffered its biggest one-day%age loss of the year on Tuesday, hitting a seven-week low on concerns about a potential slowdown in the economy of No. 2 crude consumer China.
Brent crude fell $2.79 to settle at $119.88 a barrel, the weakest close since February 17. The 2.27% slide was the biggest one-day%age loss since December 14. US crude eased below $101 on Wednesday, after settling at $101.02 the day before, the lowest close since February 14.
Copper fell to a three-month low on Tuesday, hit by softening demand prospects linked to a cooling Chinese economy and slowing jobs growth in the United States, the world's two largest copper consumers.
Gold was down 0.2% at $1,657 an ounce on Wednesday, after rising 1% the day before for a fourth straight day of gains, its longest streak in two months.