Asian shared fell dramatically on Wednesday and the safe-haven yen rallied as Chinese stocks remained fluid, rattling investors already affected by the ongoing debt crisis in Greece.
The drop in China extended a savage correction that has clipped 30% off Chinese shares since mid-June, threatening a new blow to the country's already slowing economy despite a slew of market support steps from Beijing.
MSCI's broadest index of Asia-Pacific shares outside Japan extended its early losses after Chinese shares opened sharply lower, and was last down 2.5%.
Japan's Nikkei stock index fell 1.5%, roiled by both China's dent to regional sentiment and the stronger Japanese currency.
Shanghai's benchmark composite index was down 6.4%, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen slipped 6.7%.
Chinese media reported that possibly more than half of China's listed companies have suspended or will seek trading suspensions in an attempt to escape the market rout.
Over 500 China-listed firms on Wednesday announced trading halts on the Shanghai and Shenzhen Exchange, an analysis of company statements showed.
"Today is all about China, with Greece in the background now that it's been given a new deadline," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.
"Shanghai's early losses were like a cliff-dive, which had a huge impact on investor sentiment."
US stock futures were down 0.6%, suggesting that the gloomy mood might continue throughout the global session even after Wall Street's major indexes closed higher on Tuesday.
Euro zone members gave Athens until the end of this week to propose reform measures in order to secure the funding it needs to stay in the euro zone.
Investors fear Greece's financial woes, if it fails to reach a deal with its lenders, could spread to other southern European nations. These concerns grew when the European Central Bank increased the haircuts on the collateral it demands from Greek banks even as it maintained its emergency liquidity funding for them.
"The main concern remains the extent to which large market moves are consistent with risk-off sentiment - there has been some EUR weakness and increase in periphery spreads, but European EGB yields have compressed as Bund yields compressed proportionally more," strategists at Barclays said.
"Nonetheless, we do not rule out that contagion increases as the situation worsens in Greece," they added.
The euro was down about 0.2% on the day at $1.0984, after falling as low as $1.0916 on Tuesday, its lowest since June 2.
The euro skidded 0.5% to 134.13 yen, after falling to a six-week low of 133.52 on Tuesday. The dollar slipped about 0.4% to 122.11 as the Greek and Chinese uncertainty heightened the Japanese currency's safe-haven appeal, though it remained above its six-week low of 121.700 yen hit on Monday.
The yield on the 10-year note last stood at 2.218%, above its US close of 2.231% on Tuesday, when it dropped to a five-week low of 2.185%.
US crude erased early gains and dropped 0.4% to $52.14 a barrel.