Filomena Scalise

Tokyo - Asian shares lurched to a 4-1/2 month low on Friday, extending the previous day's weakness as disappointing Chinese manufacturing data raised concerns over the economy, and investors sought safety in gold and the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, adding the previous session's 1.3 percent decline following the Chinese factory activity report.

As the yen strengthened sharply against the dollar overnight, Japan's Nikkei benchmark dropped 1.5 percent in relatively active trade after earlier touching a one-month low. The loss added to Thursday's 0.8 percent decline.

“Sentiment was already poor because of the poor US jobs data released early this month, and it was exacerbated by the Chinese figures,” said Naoki Kamiyama, head of Japan equity strategy at Bank Of America Merrill Lynch in Tokyo.

A decline in the flash Markit/HSBC Purchasing Managers' Index for China, the world's second-largest economy, reinforced concerns about global growth, especially in commodity-sensitive emerging markets.

“As capital costs rise and investment slows, commodity prices should come under pressure, boding poorly for economies linked to China's old growth model,” Morgan Stanley analysts wrote in a note.

Emerging currencies were battered overnight, with the Turkish lira hitting a record low against the dollar, the South African rand slumping to a 5-1/2 year trough and the Russian rouble falling to its weakest in nearly five years.

On top of that the Federal Reserve is expected to continue to dial back its bond purchases when it meets next week after US jobless claims data reflected an acceptable, if underwhelming, pace of job growth - heaping more pressure on emerging country currencies.

The Indonesian rupiah fell 0.2 percent to 12,180 per dollar, touching a two-week low on Friday morning, while Jakarta shares shed 1.2 percent.

The dollar stabilised against the euro, Swiss franc and the yen after taking a beating in the previous session.

The greenback was up 0.1 percent against a basket of major currencies, having fallen 0.9 percent, marking its worst one-day decline in three months and hitting a three-week trough.

The euro was a tad softer at $1.3686, though it remained near a more than one-week high of $1.3699. The single currency climbed 1.1 percent on Thursday, its biggest single-day gain since mid-September, on the back of mostly encouraging business surveys from the euro zone's private sector.

“We would be cautious of fading this risk aversion move given the scale of some of the losses in commodity and emerging forex, and the EUR may stay better supported in the near-term as EUR-funded risk positions are covered,” analysts at BNP Paribas wrote in a note.

The yen advanced 1.2 percent against the dollar in the previous day, marking its biggest one-day gain since late August. The Japanese currency took a breather on Friday morning, down 0.2 percent at 103.51 yen to the dollar.

Wall Street has so far gone off to a stuttering start in 2014 after rallying nearly 30 percent last year.

On Thursday, US stocks fell, with the Standard & Poor's 500 off 0.9 percent and the Dow Jones industrial average down 1.1 percent to record its third consecutive day of losses. S&P 500 E-mini futures were up 0.1 in Asian trade on Friday.

In response, investors cut their positions in risky assets, buoying the safe-haven assets of gold and highly-rated government bonds.

Yields on 10-year benchmark US Treasuries hit a seven-week low of 2.7589 percent on Thursday, while those on German Bunds fell to 1.713 percent, also reaching a seven-week low.

Gold gave up some of Thursday's more than 2 percent jump. It was down 0.2 percent at $1,259.55 an ounce on Friday morning, though still not far from a six-week high of $1,265.40 set in the previous day.

US crude futures was little changed at $97.35 a barrel, not far from a three-week high of $97.84 hit on Thursday after data showed a larger-than-expected drawdown of distillate stocks caused by sustained cold. - Reuters