Asian stocks fell to a 4-year low on Thursday on growing fears a global recession would depress corporate earnings, while the dollar rose to a 2-year high against the euro, underpinned by the unwinding of risky trades.

Investors have mostly sought refuge in government debt of the euro zone, Japan and the United States as well as the yen, after credit market stabilisation in the last week unearthed a renewed focus on the adverse impact of the financial crisis on real economies, especially in emerging markets.

The cost of insurance against sovereign debt default in countries such as South Korea, Indonesia and the Philippines soared, with a sense of panic festering two days after Argentina moved to nationalise its pension system. The step was interpreted by investors as a desperate measure to stave off default.

Markets in developing countries, especially those that depend on portfolio flows to balance their current accounts, were abandoned overnight, with almost no one spared from a sharp slowdown in the global economy that has pushed crude prices below $70 a barrel and dragged copper prices to a three-year low.