Asian stocks slumped and gold surged to a record above $1,800 in early trade Thursday on renewed fears over the US economy and eurozone debt.
Dealers sold equities and bought into safe-havens such as gold and the Japanese yen as they were spooked by rumours that France or its huge banks could be hit with a credit downgrade, following last week's historic US ratings cut.
French President Nicolas Sarkozy cut short his holiday to announce new moves to slash France?s massive debt and the downgrade was quickly denied, but it failed to prevent steep selloffs across Europe, which was led by banks.
The pattern was repeated in the United States where the Dow Jones Industrial Average lost 4.62 percent, with the broader S&P 500 falling 4.42 percent.
"In essence, there's still a lot of fear in the market," said CMC Markets chief strategist Michael McCarthy in Australia.
Asian bourses followed suit, with Tokyo shares tumbling 1.79 percent at the opening bell.
The Nikkei index at the Tokyo Stock Exchange dropped 162.20 points to 8,876.54 while the broader Topix index of all first section shares fell 1.90 percent or 14.72 points to 762.01.
Japanese Finance Minister Yoshihiko Noda reiterated that he remained attentive to financial markets, as the Japanese yen hovered close to a record high against the dollar.
A high yen generally hurts Japan's export sector, the nation's main economic engine. The yen stood at 76.90 to the dollar Thursday morning, close to the 76.83 seen in New York Wednesday.
"I think one-sided movements (in the forex market) are continuing," Noda told reporters minutes before the market opened.
"I'll continue to watch the market today with keen awareness."
Hong Kong opened 2.52 percent lower while South Korean shares were also slammed, losing four percent with the benchmark KOSPI index opening 72.32 points lower at 1,733.92.
Sydney was down just 1.4 percent mid-morning with the benchmark S&P/ASX 200 off 58.2 points at 4,083.1.
As stock markets fell, dealers were moving into the bullion market, sending the price of the precious metal to a record $1,814.50-$1,815.50 an ounce.
IG Markets analyst Ben Potter said July jobs figures in Australia due later in the day would be closely watched.
"Whilst the macro concerns are the big drivers at the moment, traders will still watch the numbers closely," he said.
The commodities-linked Australian dollar followed the market down, trading more than two US cents lower than its 103.63 cent close on Wednesday.
In early action it was fetching 101.61 US cents. Among other currencies, the euro was down marginally against the greenback, trading at $1.4174