China stocks were up more than one per cent, however, despite news that the country's industrial output growth had slowed to 8.2 per cent in October, compared with 11.4 per cent in September.

The announcement on Thursday came as Wen Jiabao, the premier, was quoted by state media as saying that the impact of the global financial woes on China's economy was "worse than expected".

With the latest earning period nearing an end, analysts say investors are now turning their attention to the upcoming Christmas shopping season to gauge the extent of the US slowdown and the health of the world's largest economy.

"It's of course going to be bad," Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo told the Associated Press. "The question is how bad."

Thursday's steep falls on Asian markets came after Henry Paulson, the US treasury secretary, said the government was scrapping plans to buy bad mortgage assets from banks in a refocus of its massive financial bailout plan, raising fears that the economy may be deteriorating rapidly.

Paulson said he wanted to stop buying up bank mortgage debts as part of the $700bn bailout plan and instead use some of the funds to secure "non-bank" credit, such as credit cards.

The announcement drew criticism from Democrats, who called the policy shift an abandonment of the bill negotiated between congress and the White House last month.