Asian markets slumped Tuesday -- led by a four percent fall in Tokyo -- following a huge sell-off on Wall Street as disappointing US manufacturing data compounded already deep fears about emerging markets.
Traders were also spooked by a warning from Treasury Secretary Jacob Lew, who warned that the US borrowing limit will be reached on Friday, renewing fears of a Washington stand-off and possible default.
Tokyo dived 4.18 percent, or 610.66 points, to 14,008.47. The losses leave the Nikkei 14 percent down since the start of the year, having surged 57 percent in 2013 to mark its best year in four decades.
Seoul fell 1.73 percent, or 33.11 points at 1,886.85 and Sydney lost 1.75 percent, or 90.8 points, to 5,097.1.
Hong Kong plunged 2.89 percent, or 637.65 points, to 21,397.77. Chinese tech giant Lenovo dived 16.40 percent on fears it may have bitten off more than it can chew with the purchase last week of struggling Motorola from Google for $2.91 billion.
The firm slumped more than eight percent on Thursday in response to the news, before the stock market closed for the Lunar new Year holiday.
Shanghai and Taipei were closed for the Lunar New Year holiday.
US stocks took a hammering on Monday after the Institute for Supply Management said its purchasing managers index (PMI) of manufacturing activity fell to 51.3 in January from 56.5 in December. A figure above growth indicates growth and anything below points to contraction.
On Wall Street the Dow closed down 2.08 percent, the S&P 500 fell 2.28 percent and the Nasdaq 2.61 percent.
The results -- following worse-than-expected jobs data in January -- raised concerns the US economy may not be as strong as initially thought, a worry for investors less than a week after the Federal Reserve said it would reduce its stimulus, citing signs of a strong recovery.
They also come as emerging markets are rattled by fears of capital flight caused by the Fed tapering as well as signs of weakness in China, a key driver of global growth.
China at the weekend released official figures showing its PMI fell to 50.5 in January from 51 in December and HSBC last week said its PMI for the country came in at a six-month low of 49.5.
Lew warns on debt ceiling
Credit Agricole analyst Mitul Kotecha said "suffice to say investors should steer clear of risk assets (such as equities) over the short term as the turmoil does not look like it will be over anytime soon".
"A combination of tapering, a confluence of country specific emerging market country concerns and weaker growth in China provide the backdrop for a volatile few weeks if not longer, ahead," he said in a note.
In the United States Lew said time was running out for politicians to raise the government's debt limit. Analysts warn that failure to meet its obligations could lead to a global downturn similar to the 2008 financial crisis.
"Congress needs to act to extend the nation's borrowing authority, and it needs to act now," Lew said in prepared remarks at the Bipartisan Policy Center, a Washington think tank.
He warned that officials would have to start using special measures after February 7 to keep the US paying its bills. While previous stand-offs have ended in agreement between Republicans and Democrats they did not come before causing global market turmoil.
In currency dealing the greenback edged up against the yen after tanking to levels not seen since the start of December.
The dollar was at 101.26 yen Tuesday afternoon, from 100.94 yen late in New York and sharply down from 102.31 yen in Tokyo earlier Monday.
The euro bought $1.3497 and 136.65 yen compared with $1.3529 and 136.58 yen.
Oil prices were higher. US benchmark West Texas Intermediate for delivery in March gained 19 cents to $96.62 and Brent North Sea crude for March was down 14 cents at $105.90.
Gold fetched $1,257.10 an ounce at 0830 GMT, compared with $1,246.50 late Monday.
In other markets:
-- Wellington was 0.97 percent, or 46.88 points, lower at 4,802.62.
Software firm Xero dived 4.33 percent to NZ$37.80, Air New Zealand slipped 1.17 percent to NZ$1.695 and Fletcher Building was steady on NZ$8.96.
-- Manila shed 2.15 percent, or 129.29 points, to 5,886.01.
Top-traded Bank of the Philippine Islands fell 2.09 percent to 86.55 pesos and Philippine Long Distance Telephone Co. plunged 1.95 percent to 2,618 pesos.