Asian shares and the euro extended losses on Friday as China's factory activity data delivered its weakest reading this year, highlighting concerns the worsening euro zone debt crisis will further undermine global economic growth.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1% after ending May with a 10.9% slide for its worst monthly performance in eight months.
Shares in Australia, which is highly dependant on demand from China, the world's second-largest economy, also slipped 1%, while the euro touched a fresh 23-month low against the dollar as the weak Chinese data dampened risk appetite.
Japan's Nikkei fell 1% after registering its biggest monthly drop in two years in May and was set for its worst weekly losing streak in 20 years.
China's official purchasing managers' index (PMI) fell to 50.4 in May, down from April's 13-month high of 53.3 and below the 52.2 forecast, the latest sign that Chinese output is cooling.
"China's data only added to the negative tone in the market as it showed the country needs to prop up its weakening domestic demand, which means demand for commodities will remain sluggish until proper measures are taken," said Naohiro Niimura, a partner at Tokyo-based research and consulting firm Market Risk Advisory Co.
The data compounded worries about Spain's banking system and the fate of Greece with the euro bloc, which strengthened a flight to quality and risk aversion flows in funds.
Investors will also be turning to data from the United States due on Friday after overnight reports showed private employers created fewer jobs than expected and a rise in new unemployment benefit claims raised concerns about the pace of the US recovery.
Economists expected US nonfarm payrolls, due on Friday, to rise by 150,000 jobs in May, up from 115,000 in April, while the unemployment rate likely held steady at 8.1%.
"Given the heightened uncertainty about the outlook for Europe and the global economy, we recommend staying defensive in FX markets," Barclays Capital analysts said in a note. They suggested positioning for a weaker euro but also trading risky currencies "tactically based on region-specific developments".
As further evidence of global deterioration, data on Thursday showed India's annual economic growth slumped in January-March to a nine-year low of 5.3%.
The euro fell as low as $1.2324 on Friday and hovered near an 11-1/2-year low against the yen at 96.48 hit on Thursday.
The yen eased against the dollar to 78.55 yen on Friday after rising to a 3-1/2 month high of 78.21 yen the day before on strong bids for safety.
The flight to safety lifted the dollar index, measured against a basket of major currencies, to its highest since August 2010 above 83.3 on Friday.
US crude fell 0.4% to $86.16 a barrel on Friday after settling at the lowest close since October 20. With a 17.5% loss for May, US crude futures marked their biggest monthly decline since December 2008.
Brent crude futures eased 0.3% at $101.56 on Friday after settling at its lowest finish since early October.
