A currency trader watches monitors in front of screens showing the Korea Composite Stock Price Index (KOSPI), center, and foreign exchange rate, left, at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Thursday, Nov. 8, 2012. South Korea's Kospi dropped 1.19 percent at 1,914.43. (AP Photo/Ahn Young-joon)
A currency trader watches monitors in front of screens showing the Korea Composite Stock Price Index (KOSPI), center, and foreign exchange rate, left, at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Thursday, Nov. 8, 2012. South Korea's Kospi dropped 1.19 percent at 1,914.43. (AP Photo/Ahn Young-joon)
A man stands outside a securities firm in Tokyo Thursday, Nov. 8, 2012. Asian stock markets tumbled Thursday after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Barack Obama. Japan's Nikkei 225 index shed 1.7 percent to 8,822.15. (AP Photo/Junji Kurokawa)
An investor looks at the stock price monitor at a private securities company in Shanghai, China, Thursday, Nov. 8, 2012. Asian stock markets tumbled Thursday after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Barack Obama. Also being watched by investors is Thursday's opening of China's Communist Party congress ? the once-in-a-decade forum to name China's top leadership. (AP Photo/Eugene Hoshiko)
A currency trader reacts in front of screens showing the Korea Composite Stock Price Index (KOSPI), center, and foreign exchange rate, right, at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Thursday, Nov. 8, 2012. South Korea's Kospi dropped 1.19 percent at 1,914.43. (AP Photo/Ahn Young-joon)
HONG KONG (AP) ? Asian stock markets sank Friday, weighed down by fears over the so-called U.S. "fiscal cliff" that investors see as a big threat to the economic recovery.
Japan's Nikkei 225 index fell 0.9 percent to 8,757.39 and Hong Kong's Hang Seng shed 0.5 percent to 21,453.49. South Korea's Kospi retreated 1 percent to 1,894.85 and Australia's S&P ASX 200 dropped 0.5 percent to 4,462.20.
The slump in Asia mirrored the trend in markets worldwide as investors have refocused on challenges to the world economy following U.S. President Barack Obama's re-election. Many worry that gridlock in Washington will prevent the president and Congress from reaching a deal before the package of tax increases and government spending cuts kicks in on Jan. 1.
Declines were more muted in mainland China, where investors were awaiting a number of economic indicators that would provide the latest update on the slowdown in the world's second biggest economy.
The Shanghai Composite Index dipped 0.3 percent to 2,065.92, while the Shenzhen Composite Index lost 0.3 percent to 828.78.
The Chinese benchmarks briefly swung into positive territory after a report released just after trading started showed October inflation had eased to 1.7 percent, giving room for more stimulus. But investors stayed cautious as they awaited industrial production, fixed asset investment and retail sales figures later in the day.
"Markets may stabilize and possibly rebound on Chinese data for October, which we expect to show acceleration of output amid muted price pressures," strategists at Credit Agricole CIB wrote in a research note.
On Wall Street, the Dow closed down nearly 1 percent to 12,811.32, bringing its two-day loss to 434 points. The Standard and Poor's 500 index fell 1.2 percent to 1,377.51 and the tech-heavy Nasdaq composite slipped 1.4 percent to 2,895.58.
In currencies, the euro weakened to $1.2748 from to $1.2750 late Thursday. The dollar strengthened to 79.49 Japanese yen from 79.38 yen.
Crude oil for December delivery was up 12 cents to $85.22 in electronic trading on the New York Mercantile Exchange. The contract rose 65 cents to close at $85.09 on Thursday.
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