Asian markets followed Wall Street down today, after Wells Fargo, America's fifth largest mortgage lender, said that the US housing market was in its worst shape since the Great Depression.

John Stumpf, Wells Fargo's chief executive, said: "We have not seen a nationwide decline in housing like this since the Great Depression."

The news drove Asian banking stocks further down, while Japanese exporters were hit by the strength of the yen and fears for the US economy.

The decline was accelerated when Toshiro Muto, deputy governor of the Bank of Japan, the country's central bank, warned that growth could be threatened if problems in the US housing market spread further.

The Nikkei 225 slid 1.6 per cent to 15,154.61, with Mizuho Financial Group, Japan's second largest bank shed 2.6 per cent and the largest, Mitsubishi UFJ Financial Group slipped 2.9 per cent.

Japan's benchmark index has now fallen 17 per cent from its February peak of 18,300.39.

Hong Kong's Hang Seng slumped by more than 4 per cent in afternoon trading after authorities in Shenzhen, in the southern Chinese province of Guangdong, capped cash withdrawals to from bank accounts to slow the transfer of cash into Hong Kong.

Japanese exporters also suffered as the yen strengthened, rekindling concern that the rising currency would mean weaker profits from overseas sales. Canon, Sony Corp and Honda Motor all fell more than 1 per cent.

Toyota, which relies on North America for around 70 per cent of its revenue, fell 1.6 per cent to 6,120 yen.

The dollar fell 0.3 per cent to around 110.00 yen. Earlier this week it hit an 18-month low of 109.10 yen.

The gloom follows another siginificant fall on Wall Street after the Federal Reserve pumped $47 billion into the money markets.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts