Asian shares slid on Friday, driving declines in other risk assets, as deepening euro zone political turmoil and weak economic data from China raised growth concerns, while a huge hedging loss from JPMorgan added to market jitters.
European shares will likely open lower, with financial spreadbetters predicting that major European markets would open down as much as 0.9%. U.S. stock futures were down 0.6%.
MSCI's broadest index of Asia-Pacific shares outside Japan fell more than 1% to its lowest in nearly four months. At current levels, the index will see a weekly fall of more than 4 percent, the biggest weekly loss since late November.
Pan-Asia's financial sector ranked among the worst performers. Financials also led Australian and South Korean equities markets lower, after JPMorgan Chase & Co said it suffered a trading loss of at least $2 billion from a failed hedging strategy, sending the benchmark Standard & Poor's 500 Index down 11.6 points late on Thursday.
JPMorgan's news "is worrying because this is a company which was perceived to being absolutely excellent in risk management, and I think over the longer term they are still excellent in risk management, but we don't have all the details and the story is not entirely clear, so as a result, that has added to the somewhat gloomy mood so far," said Guy Stear, head of research with Societe Generale in Hong Kong.
Australian shares eased 0.3%, also hurt by a weaker-than-expected Chinese industrial output and retail sales figures for April, on course for its worst weekly performance this year, while South Korean stocks plunged 1.2%, with financials underperforming.
Japan's Nikkei share average fell 0.6%.
China's annual rate of factory output grew more slowly than expected in April at 9.3%, well below the 12% forecast, and the rate of retail sales growth in April slowed to 14.1% year on year from 15.2% previously.
"Data is giving a more glum picture in terms of the level of overall economic activity and signals that the broad economy is less strong than we previously perceived," Stear said.
Earlier on Friday, China said its annual consumer inflation moderated to 3.4% in April from 3.6% in March, but above 3.3% forecast. China's producer price index (PPI) fell 0.7% in April from a year earlier, overshooting market expectations for a 0.5% fall.
The loss at JPMorgan has spooked market sentment in part due to a lack of detailed diclosure on the nature of the loss and its potential implications.
"The markets took it correctly, saying 'wait a minute you do have more risk than previously thought, and it's not inconceivable that you and others of your class have other unforeseen losses'. And that would spook markets," said David Baran, co-founder of Tokyo-based hedge fund, Symphony Financial Partners.
GREECE HITS EURO
Prior to JPMorgan's announcement, European and U.S. stocks rose after data showed U.S. claims for unemployment benefits edged lower last week, soothing concerns that weak employment growth in April pointed to worsening labour conditions.
But risk appetite remained muted largely due to heightening political and policy uncertainty in the euro zone.
The euro fell to a fresh 3-1/2 month low of $1.29050 on Friday while Australian dollar, a risk gauge, fell to a near five-month low below $1.0021.
"Difficulties in forming a coalition government in Greece are already reflected in the euro and the market is now eyeing whether Greek public will really opt for an exit from the euro or not," said Masafumi Yamamoto, chief FX strategist at Barclays. "The uncertainty keeps the euro depressed under $1.30," he said, adding that JPMorgan's news may add to investors' reluctance to take on risk.
As central banks focus more on growth than inflation, real yield differentials will be more significant in dictating forex market direction, especially for the euro/dollar, Morgan Stanley said in a note.
Uncertainty may drive currency market volatility, pegged at historically low levels by aggressive central bank liquidity injections globally, to pick up and prompt an unwinding of carry trades, with the dollar and the yen gaining, it added.
Oil retreated, with Brent crude down 0.8% below $112 a barrel and U.S. crude plunging 1.1% to $96.06 a barrel.
Spot gold fell 0.7% at $1,583 an ounce, as investors sold gold to cover losses in other assets, while a weak euro also dampened bullion's alternative currency status.
