Asian stocks nose-dived Monday as the first-ever downgrade of the US government's credit rating jolted the global financial system, reinforcing fears that the world economy is weakening.
Oil prices extended recent sharp losses, trading below $84 a barrel on expectations that weaker global growth will crimp demand for crude. The dollar was lower against the yen and the euro.
Among the major Asian markets, Hong Kong's Hang Seng tumbled 3.9 percent to 20,128.20 and South Korea's Kospi was down 4 percent to 1,814.100 after briefly diving nearly 7 percent. Japan's Nikkei 225 stock average dropped 2.2 percent to 9,094.13.
The Chinese mainland's benchmark Shanghai Composite Index slumped 3.79 percent to close at 2,526.82. The Shenzhen Component Index lost 3.33 percent to finish at 11,312.63.
The Shanghai listed stocks opened 1.03 percent lower on Monday morning and hit a year low of 2,497.92 during the morning trade.
Futures pointed to losses on Wall Street when it opens Monday. Dow futures were off 265 points, or 2.3 percent, at 11,138 and broader S&P 500 futures shed 30 points, or 2.5 percent, to 1,167.80.
"It's not Armaggedon, but it feels like it," said Hong Kong-based analyst Francis Lun, adding that he foresees the territory's Hang Seng index to sink below 19,000 - a decline of a further 5 percent - before making any kind of comeback.
Banking shares were tainted by fears the sector could face heavy losses as the sovereign debt crisis in Europe continued to brew. Industrial and Commercial Bank of China, the world's biggest bank by market value, fell 3.9 percent. Port operators - whose lifeblood of imports and exports would be at risk if the global economy goes bust - were stung badly. Hong Kong-listed China Shipping Container Lines Co dropped 10.2 percent.
Meanwhile, a strengthening yen, which makes Japanese products more expensive when they are sent overseas, slammed the country's powerhouse export sector. Hitachi Corp dropped 4 percent. Sony was 3.7 percent down. Mazda Motor Corp lost 3.6 percent.
Standard & Poor's downgrade of the US sovereign credit rating to AA+ from the top-notch AAA, announced late Friday, was yet another blow to confidence in the struggling US economy. It adds to growing fears that the world's No 1 economy may be headed back into recession.
Those anxieties have been compounded by signs that Europe's government debt crisis is threatening to engulf bigger economies such as Italy and Spain.
David Cohen of Action Economics in Singapore said the downgrade Friday did not come as a surprise, given the warnings issued by the agency weeks in advance - but that it may serve as a wake-up call for leaders to take action.
"As long as people can calm down quickly enough, it need not become another global financial crisis," Cohen said.
Elsewhere in Asia, Australia's S&P/ASX 200 index dropped 2.7 percent to 3,994.80. Singapore's benchmark dived 4.9 percent. "I think it's still a matter of people being cautious given they don't really know how wildly these overseas markets will respond," Westpac Banking Corp chief economist Bill Evans told Australian Broadcasting Corp television.
"I would expect people will take the risk off the table at the moment waiting for some more clarity in those two big issues: how will the US respond to the downgrade and will the Europeans settle down these concerns in Europe?" he said.
Seeking to avert panic spreading across financial markets, finance officials from the Group of Seven industrial countries issued a joint statement late Sunday saying they were committed to taking all necessary measures to support financial stability and growth.
The G7 statement came after the group held an emergency conference call to discuss the debt crisis in Europe and market prospects following the announcement of the first-ever downgrade of the US credit rating.
The European Central Bank, meanwhile, said it will "actively implement" a bond-purchase program that could boost Spanish and Italian bonds and drive down interest yields that threaten those countries with financial disaster.
The burst of activity underscored how government debt levels in Europe and the US have unsettled financial markets - and sharpened fears that debt troubles could derail the global recovery from the 2007-2009 financial crisis.
The Dow fell 5.8 percent last week amid dour US economic news. It plunged 513 points on Thursday alone, the worst day for the Dow since the global financial crisis erupted in 2008.
Benchmark oil for September delivery was down $3.06 to $83.84 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose 25 cents to settle at $86.88 on Friday.
In London, Brent crude was down $2.91 at $106.46 per barrel on the ICE Futures exchange.
In currencies, the dollar weakened to 77.82 yen from 78.34 yen late Friday in New York. The euro rose to $1.4330 from $1.4265.
