TOKYO (Reuters) - The Tokyo market slumped to a 28-year low on Monday as Asian shares dived on fears of a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.
Tokyo's Topix index lost as much as 2.4 percent to 692.18, a level not seen since late 1983, according to Reuters data, while the Nikkei average of major stocks tumbled 2 percent. The Nikkei last week marked its ninth straight week of losses, the longest such losing streak run in 20 years.
The MSCI's broadest index of Asia-Pacific shares outside Japan fell by as much as 2.5 percent to 2012 lows, down 17 percent from this year's peak, continuing a rout of global stocks sparked on Friday by weak U.S. jobs data.
European shares were likely to extend their losses, having wiped out all their 2012 gains on Friday. Spreadbetters tipped major European markets to fall by as much as 1.8 percent when trading resumes on Monday.
And U.S. stock futures also pointed to more selling when investors wake up in North America, with S&P 500 futures down 0.7 percent in Asian trade.
"Investors are just fleeing risk assets," said ATI Asset Management chief investment officer Simon Burge.
"Bond yields are at an all-time low. Even in the global financial crisis we didn't see bond yields at the levels that they have reached now ... This is a flight from risk assets that is unprecedented," Burge said.
The benchmark 10-year Japanese government bond yield fell below 0.80 percent to its lowest since July 2003. Ten-year JGB futures prices jumped to a 19-month high.
U.S. and German government bond yields had both hit record lows on Friday, with 10-year German yields dipping to 1.127 percent and 10-year Treasury yields touching a historic low of 1.442 percent.
"The jobs number from the U.S. was shocking and Spain is now becoming a big worry. On top of that everyone who thought Q1 would be the bottom for the Chinese economy has realized that this is a real slowdown that could go on," said Larry Jiang, Hong Kong-based chief investment strategist at Guotai Junan Securities.
The CBOE Volatility index, which measures expected volatility in the Standard & Poor's 500 index over the next 30 days, jumped nearly 11 percent to its highest since mid-December on Friday, reflecting mounting risk aversion.
POLICY RESPONSES EYED
Analysts said the flight to bonds would continue until clarity emerged on issues such as the outcome of Greek elections due on June 17 and the recapitalisation of European banks, now in the shadow of a Spanish banking crisis.
"It's not an issue of risk-on or risk-off anymore, it's nervousness all over until a clear direction emerges on a long-term trend," said Hisamitsu Hara, chief foreign exchange manager at Bank of Tokyo-Mitsubishi UFJ.
U.S. jobs growth braked sharply for a third straight month in May and the jobless rate rose for the first time in nearly a year, with 69,000 jobs added to payrolls last month, the least since May last year.
The weak data followed poor Chinese manufacturing and dismal European data on factory activity, rattling markets that had already been on edge over the deepening euro-zone crisis. The numbers fuelled speculation that the U.S. Federal Reserve would have to launch further monetary stimulus to shore up growth.
A Reuters poll of 15 primary dealers, which do business directly with the Fed, showed a 50 percent chance of a third round of quantitative easing.
The yen was off its Friday highs against the dollar and the euro. It stood at 78.13 yen to the U.S. dollar, off a 3-1/2 month high of 77.65 yen hit on Friday. It traded at 96.94 against the euro, having reached around 95.59 yen on Friday, its strongest level since December 2000.
The euro was at $1.2408, recovering from Friday's trough of $1.2288, its lowest in nearly two years. The Australian dollar, which is closely linked to risk appetite, staged only a meek recovery from eight-month lows hit on Friday.
"If the European situation worsens, then the global interest rate and policy solutions would require coordinated actions by the Bank of Japan and the Federal Reserve to assure access to U.S. dollar money markets, otherwise risk a contraction in global trade," said Richard Hastings, macro and consumer strategist at Global Hunter Securities.
COMMODITIES SLIDE
Analysts are eagerly awaiting the European Central Bank's policy decision on Wednesday and U.S. Fed Chairman Ben Bernanke's congressional testimony on Thursday, looking for clues on their responses to vulnerable global growth.
Spot gold edged 0.2 percent lower to $1,622.81 an ounce on Monday, largely holding its ground after recording its biggest one-day rally in more than three years on Friday.
U.S. crude futures fell 1.9 percent to $81.65 a barrel to its lowest in almost eight months, and Brent dropped 1.7 percent to $96.79, a 16-month low.
Worries about slowing global growth also pushed Shanghai copper down more than 3 percent to a new 2012 low of around 52,450 yuan a tonne.
Heightened risk aversion pushed up the cost of insuring against corporate and sovereign defaults in Asia, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 13 basis points.
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