Asian markets tumbled and the euro slumped to its lowest level against the yen in almost 12 years on Monday as Spain's debt crisis deepened, raising concerns over the wider eurozone.
With borrowing costs hitting the danger levels that forced Ireland, Greece and Portugal to seek a bailout, investors are concerned that Spain, one of the eurozone's biggest economies, will also have to call for help.
Tokyo slumped 1.86 percent, or 161.55 points, to 8,508.32, Sydney shed 1.67 percent, or 70.2 points, to close at 4,128.9 and Seoul closed 1.84 percent, or 33.49 points, off at 1,789.44.
Hong Kong was the biggest loser, slipping 2.99 percent, or 587.33 points, to 19,053.47 and Shanghai fell 1.26 percent, or 27.24 points, to 2,141.40.
Market players were spooked by reports that one of Spain's indebted regions, Valencia, would ask the central government for financial support, while officials in Madrid warned that the economy would likely contract through 2013.
"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said Peter Esho at CityIndex in Australia.
The worries sent Spanish borrowing costs to a euro-era record level, with the 10-year bond yield climbing to 7.343 percent early in Europe on Monday and the cost of insurance against a default by Madrid hitting a record high.
The euro at one point fell to 94.24 against the yen, its lowest level since late 2000.
In Tokyo trade the euro, which also tumbled Friday amid the Spanish woes, bought 94.34 yen, compared with 95.38 late Friday in New York.
"It's not the kind of situation where fears are just going to fade away, since the required amount of aid that Spain will need is likely to mount given the increasing needs of local governments," Rakuten Securities senior market analyst Masayuki Doshida told Dow Jones Newswires.
European leaders on Friday agreed to grant Spain's banks bailout cash of up to 100 billion euros but despite this there are fears that the country will need extra cash to help service its debts.
The soaring yields on 10-year bonds come as unemployment sits at 24 percent and the government tries to implement further austerity measures.
Without better economic news the country could lose access to debt markets, leading it to a bailout, which some analysts have said could cost up to $500 billion.
The euro was also down at two-year lows of $1.2102, from $1.2152 on Friday. The dollar bought 77.99 yen, compared with 78.48 yen.
In morning trade in Europe the London FTSE fell 0.9 percent, the IBEX-35 in Spain tumbled 1.7 percent, Frankfurt's DAX shed one percent and the CAC in Paris lost 1.1 percent.
On oil markets New York's main contract, light sweet crude for September delivery, sank $1.47 to $90.36 a barrel while Brent North Sea crude for delivery in September dropped $1.42 cents to $105.41.
Gold was at $1,571.22 an ounce at 1100 GMT, from $1,581.20 on Friday.
In other markets:
-- Taiwan fell 1.90 percent, or 135.95 points, to 7,028.73.
Taiwan Semiconductor Manufacturing Co shed 3.13 percent to Tw$74.3 while Hon Hai Precision lost 3.35 percent to Tw$86.6.
-- Manila fell 1.37 percent, or 71.49 points, to 5,139.40.
Ayala Land was down 2.7 percent at 19.90 pesos, conglomerate, SM Investments lost 0.4 percent to 715 pesos and Philippine Long Distance Telephone shed 1.0 percent to 2,688 pesos.
-- Wellington closed flat, edging up 1.66 points to 3,465.36.
Telecom rose 1.2 percent to NZ$2.54 and Fletcher Building fell 0.3 percent to NZ$5.81.
-- Kuala Lumpur was down 0.42 percent, or 6.83 points, to 1,636.17.
Genting Malaysia lost 2.2 percent to 3.50 ringgit while Tenaga Nasional shed 1.6 percent to 6.72 ringgit.
-- Jakarta shed 1.75 percent, or 71.41 points, to 4,009.79. Coal miner Bumi Resources fell 4.6 percent to 1,040 rupiah and tin miner Timah slid 2.5 percent to 1,380 rupiah.
-- Singapore lost 1.10 percent, or 33.04 points, to 2,982.49.
Fraser and Neave gained 4.21 percent to Sg$7.92 while DBS Group fell 1.64 percent to Sg$14.44.
-- Bangkok shed 1.94 percent, or 23.44 points, to 1,185.11.
Banpu lost 3.08 percent to 440.00 baht, while PTT dropped 4.12 percent to 326.00 baht.
-- Mumbai fell 1.64 percent, or 281.09 points, to 16,877.35. India's top carmaker Maruti Suzuki fell 5.65 percent to 1,079.9 rupees amid uncertainty over when its riot-hit Manesar plant would re-open.