Asian shares appeared tentative on Friday, holding steady after a nine-day losing streak, but the sentiment was frail after Wall Street shares crumbled and expectations of market volatility shot up to an eight-month high.
Worries about the economic impact of a Sino-U.S. trade war, a spike in U.S. bond yields this week and caution ahead of earnings seasons are all cited as potential reasons behind the selloff, the biggest market rout since February.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 per cent after the opening of South Korea and Australian markets, a day after it fell 3.6 per cent to hit 1-and-a-1/2 year low.
Japan's Nikkei fell 0.6 per cent.
The U.S. S&P 500 lost 2.06 per cent on Thursday to a three-month low, following on from a 3.29 per cent drop on Wednesday.
U.S. stock futures rebounded 0.6 per cent in early Asia on Friday, in part helped by a media report that the U.S. Treasury Department will not call China a currency manipulator in an upcoming report.
"The (U.S. share) market is now about seven per cent off of its 100-day high, but this is far from a rare occurrence historically. Indeed, history is littered with over five per cent-ish type selloffs in the midst of economic expansions," wrote economists at RBC Capital Markets.
Still, sentiment remains shaky with the Cboe Volatility index rising to 24.98, its highest close since Feb. 12, a day after the S&P 500 fell more than 3 per cent.
"There still appears to be downside risk to the market amid worries the Sino-U.S. trade war may be slowing down global growth," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
Indeed, so far this week Chinese and U.S. shares are among the worst performers in a sign that investors' worries about the trade war are deepening.
MSCI's China A-shares index is down almost 10 per cent while MSCI's U.S. index shed 5.5 per cent, compared with a 4.9 per cent fall for MSCI's gauge of stock performance in 47 countries.
Gold, typically seen as a safe-haven asset at times of high uncertainty, jumped 2.5 per cent, its biggest daily gain since June 2016.
Flight-to-quality bids boosted prices of U.S. Treasury bonds, pushing down yields. The yield on 10-year notes fell to 3.146 per cent, off a seven-year high of 3.261 per cent touched on Tuesday on fears about inflation.
The fall in U.S. yields helped push the dollar lower as it undermines the attraction of investments in dollar bonds.
The euro traded at $1.1593, after a gain of 0.65 per cent on Thursday.
The yen hit a three-week high of 111.83 to the dollar on Thursday and last stood at 112.06.
The Chinese yuan also gained about 0.65 per cent in offshore trade to 6.8817 to the dollar, rebounding from an eight-week low set earlier on Thursday.
Oil prices slumped to more than two-week lows.
Brent crude futures fell $2.83 on Thursday to settle at $80.26 a barrel, a 3.4 per cent loss, after hitting a low of $79.80, the weakest since Sept. 24. The global benchmark has retreated after hitting a four-year high of $86.74 on Oct. 3. Brent last stood at $80.33.
(With inputs from agencies.)