Recession fears continue to plague markets across the world [Reuters]

Tokyo's benchmark Nikkei index, which fell by more than six per cent earlier, was down by less than two per cent after the lunch break while Hong Kong's Hang Seng index which opened about four per cent lower, moved into positive territory by more than one per cent.

In South Korea, the benchmark Kospi index fell by more than four per cent before reversing for a three per cent gain following the central bank cutting its key interest rate for the third time in a less than a month.

The Bank of Korea lowered its benchmark seven-day repurchase rate from 4.25 per cent to four per cent on Friday, following a quarter percentage point cut on October 9 and a three quarters of a percentage point cut on October 27 - the biggest ever.

Markets elsewhere in Asia mostly strengthened in the afternoon after initially tracking Wall Street's plunge for a second consecutive day following the Bank of England's move to slash its key lending rate by a larger-than-expected 1.5 percentage points.

The cut to three per cent far exceeded expectations as economic indicators suggested Britain was heading towards recession.

In the US overnight on Thursday, data indicating some of the worst US retail sales in decades sent the Dow Jones industrial average diving by more than 400 points or nearly five per cent, bringing total losses to about 10 per cent since Barack Obama was elected US president on Tuesday.

The broader Standard & Poor's index also shed five per cent in its worst two-day slide since October 1987.

Despite a strong rally earlier this week as US voters went to the polls, the market has not been able to make much headway following a disastrous October.

US unemployment

Adding to investors' jitters, the government said the number of people continuing to draw unemployment benefits jumped to a 25-year high in October, increasing by 122,000 to 3.84 million.

The labour department said new claims for unemployment benefits had dropped but remained at elevated levels, underscoring the economic challenges Obama faces when he takes office in January.

The findings added to the market's unease ahead of Friday's employment report for October, a widely watched barometer of the economy's health.

Wall Street economists are forecasting that Friday's data will show 200,000 more jobs were eliminated in October, marking a 10th straight month of declining payrolls.

"I think electoral impacts are secondary in the markets right now," Alec Young, an equity strategist at Standard & Poor's, said.

"The predominant theme in the market is the US is clearly in a recession and the economic data and the corporate news that we're getting signals there's no relief in sight and that's really stymieing any kind of attempts at lasting rallies in the Dow Jones and S&P 500.

Analysts also said the cut in the UK bank rate was a lot more than people expected.

"It spooked people a little bit in the sense that they said 'Oh, is it really that bad?'" said Robert Hook, a portfolio manager with S G Hiscock & Co.

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