ANZCD Australia And New Zealand Banking Group Limited

Japanese stocks plummeted Friday morning, plumbing their lowest level in more than a year and leading Asian markets down after a selloff in U.S. and Europe overnight.

Japan's benchmark Nikkei was down 3.7% after a holiday on Thursday, its lowest level since October 2014. Australia's S&P/ASX 200 was down 0.9%. New Zealand's NZX50 was down 1.2%.

Japan shares are also headed for their worst weekly drop in almost five years. The market is down 21% for the year, a decline almost as steep as the losses in Chinese stocks. The Nikkei's loss this morning is putting the benchmark on track to lose almost 10% for the week, marking the worst percentage performance since the week ended March 18, 2011.

"The leads for Asia have once again centered on European banks and shenanigans in the oil complex," Chris Weston, chief market strategist at IG in Melbourne, said.

The Federal Reserve's cautious stance on further rate increases raised doubts about the global economy and led to the yen's sharp rise against the dollar. The dollar was at 112.23 yen after falling to ¥ 110.99 on Thursday, the lowest level since Oct. 31, 2014, the day the Bank of Japan expanded its easing program.

Japanese Finance Minister Taro Aso said Friday morning the yen's moves have been rough and that rapid moves in the foreign exchange market aren't desirable. He said he would watch foreign exchange markets with close interest.

The yen and government bonds tend to appreciate in times of economic uncertainty. The benchmark 10-year Japanese government bond yield was flat at 0.005%.

Early weakness in Asia was tempered by some signs of stability in U.S. stocks on Thursday, as they pared steep losses in late-afternoon trading, and a surge in crude-oil prices, which clawed back from a fresh multiyear low in after-hours trading.

Sweden's central bank on Thursday cut its main interest rate further into negative territory, a move judged more aggressive than anticipated by markets as the Riksbank adds to a small but growing number of central banks willing to test the boundaries of how low interest rates can go.

Oil inflamed the wide equities selloff as crude prices settled at their lowest levels since 2003 amid worries about growing stockpiles in the U.S. and about financial markets. Oil staged a recovery after U.S. prices settled down 4.5% at US$26.21 a barrel, while Brent crude declined 2.5% to US$30.06.

Australian shares opened in the red, with bank and energy stocks leading the decline. The Australian market entered a technical bear market this week, marked by a 20% fall from its high last year, but recovered 1% on Thursday as major banks rebounded from a global banking selloff in recent sessions.

"Recurring nightmares continued overnight with price action poor and flight-to-safety flows dominating," Australia & New Zealand Banking Group said in a report to clients. "Gone are the days where bad news was good as it portended of more dovish central banks and more cheap money on offer."

It said some of the anxiety was likely chalked up to delayed disappointment in testimony by U.S. Federal Reserve Chairwoman Janet Yellen as she juggled recognizing strength in the domestic economy and potential risks of heightened financial market volatility. On Thursday, she said the U.S. central bank was studying the feasibility of pushing short-term interest rates into negative territory should it need to give the economy an added boost, which would join central banks in Europe and Japan.

On Thursday, the Dow Jones Industrial Average declined 255 points, or 1.6%, to 15660. The S&P 500 fell 1.2% and the Nasdaq Composite lost 0.4%. The Stoxx Europe 600 fell 3.7% to its lowest close since 2013, and the U.K.'s FTSE 100 closed at its lowest level since July 2012.

At the same time, investors sought safety, with U.S. government bonds, the yen and gold surging. Gold futures jumped by more than $50 an ounce to settle at the highest level in about a year at $1,247.80.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

February 11, 2016 20:35 ET (01:35 GMT)

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