Major European markets opened mixed, then slid downward.
"Sentiment is lousy," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong. "Earnings are disappointing, and we're still in the process of lowering profits all across the globe."
Japan's Nikkei 225 stock average tumbled 7 percent at the open but recovered some to closed down 2.5 percent at 8,460.98. Traders said the turnaround in Tokyo was partly due a Wall Street Journal report that the Bush administration is considering a $40 billion plan to help limit home foreclosures.
South Korea's market was hit hardest. The benchmark Kospi fell nearly 10 percent at one point and closed down 7.5 percent at 1,049.71. Hong Kong's Hang Seng Index fell 3.6 percent to 13,760.49 after falling more than 6 percent earlier.
Asia's downward lurch followed Wall Street as hundreds of companies reported third-quarter results and issued murky forecasts this week, signs that the economic slowdown was taking a toll on balance sheets despite recent improvements in the world credit markets.
Tokyo investors were cautious ahead of the release of corporate earnings next week, including Canon Inc. on Monday and Honda on Tuesday.
Japanese electronics powerhouse NEC Corp. plunged 8.5 percent after slashing its full-year earnings estimates Wednesday, blaming weaker demand for mobile phones and computer chips.
"The new numbers are below even our forecasts, which were at the bottom end of market estimates," said Takeo Miyamoto, an analyst at Deutsche Securities in Tokyo, in a report Thursday. "We predict strong disappointment in the market."
Australia's key index pulled back more than 4 percent as slumping world commodity prices sent resource companies lower. Rio Tinto fell more than 14 percent while rival BHP Billiton sank more than 9 percent.
"The markets really seem to be pricing in a slowdown in growth across the globe, and that's really hurting base metals," said Matthew Lewis, a senior dealer at CMC Markets in Sydney.
Overnight in New York, the Dow fell 514.45, or 5.69 percent, to 8,519.21, after being down as much as 698 points in the final half-hour of trading. The Standard & Poor's 500 index was the worst performer among the major indexes with a 6.1 percent drop that left it at its lowest level since April 2003.
Oil rebounded modestly after plummeting more than $5 overnight to near 16-month lows. In Asian trade, light, sweet crude for December delivery rose $1.35 to $68.10 a barrel.
South Korea's currency, meanwhile, slid further Thursday amid heavy selling of stocks by foreign investors, falling 3.3 percent against the dollar to 1,404,80. The won, one of the world's worst performing currencies, has fallen 33.6 percent this year, according to the Bank of Korea.
Japanese exporters were also battered by the surging yen against the dollar and euro. A stronger yen decreased the value of overseas profits when repatriated to Japan. The dollar was little changed at 97.79 yen from 97.70 late Wednesday in New York, while the euro was trading at 125.69 yen.
In two months, the yen has gained more than 10 percent against the dollar and more than 20 percent versus the euro. The euro is at its weakest level against the Japanese currency since January 2003.
Mazda Motor Corp. plummeted 10.9 percent, Isuzu Motors Ltd. 9.6 percent, and Honda Motor Co. fell 6.6 percent. Game console maker Nintendo Co., which releases earnings Oct. 30, closed 8.65 percent lower.
In a sign that credit markets remain tight, Hong Kong's interbank offered rate, also known as Hibor, for three-month loans rose slightly to 3.24 from 3.14 after falling in recent days.
AP writer Tomoko Hosaka in Tokyo contributed to this report.