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Hong Kong - Asian markets sank again on Friday after Greece's latest bailout reform talks failed to reach a deal days before a major debt deadline, while Shanghai collapsed on fears Chinese stocks are overvalued after a year-long advance.
The euro also turned lower as investors look ahead to the weekend, when finance ministers said they will hold more last-minute negotiations to break a five-month impasse.
Tokyo fell 0.31% to close at 20 706.15, while Sydney shed 1.54% to 5 545.90.
Shanghai plunged 8.5% at one point, its biggest loss in eight years, as investors that had flooded the market on margin trading - borrowing cash to buy stocks - decided to pull out as the index suffers a correction.
The market, which surged 150% in the year to June 12, eventually closed down 7.40% at 4 192.87 - its lowest since the start of May.
The benchmark index has fallen almost 20% in two weeks, having soared more than 140% in the previous 12 months.
Hong Kong felt some of the pain from across the border, losing 1.78% to 26 663.87.
But Seoul gained 0.25% to close at 2 090.26 on hopes that a new $14 billion stimulus package would help boost the sagging economy, which has been hit by the deadly MERS outbreak.
Despite marathon talks on Thursday Greece and its EU-IMF creditors were unable to reach an agreement to overhaul its bailout terms that would unlock billions in much-needed cash for Athens.
The discussions had meant to pave the way for European Union leaders to endorse an accord at a full summit but ended abruptly, deciding to try again on Saturday.
"We have not made the necessary progress. In some areas one even gets the impression that we have moved backwards," German chancellor Angela Merkel told reporters as she arrived for the Brussels summit.
With both sides blaming the other and neither willing to budge on key issues - mostly tax and pension reform - investors fear Greece will not get its cash by a June 30 deadline, leaving it in default and likely crashing out of the eurozone or even the European Union.
The deadlock once again hit US shares. The Dow fell 0.42%, the S&P 500 lost 0.30% and the Nasdaq eased 0.20%.
European shares mostly retreated although Athens ended slightly higher.
Early on Friday Merkel and French President Francois Hollande said Saturday's meeting would be crucial to finding a deal.
"We have to keep working because time is pressing and the Eurogroup on Saturday will have a decisive importance," Merkel told a news conference in Brussels.
"All the leaders supported the idea that everything must be done to find a solution on Saturday."
The euro slipped to $1.1199 and ¥138.23 in Tokyo on Friday from $1.1206 and ¥138.53 in New York
The dollar was at ¥123.43 against ¥123.62 in US trade
In China, markets were again in retreat after last week's sell-off as margin traders began to cash out.
"Margin traders, especially over-the-counter leveraged traders, reduced or closed their positions on the market, which is the main reason for the plunge," Central China Securities analyst Zhang Gang told AFP.
Outstanding margin debt in Shanghai dropped for a fourth straight day on Thursday to $228m Bloomberg News reported.
China's central bank injected liquidity into the banking system on Thursday after halting open market operations for several weeks.
Adding to selling pressure were recently introduced rules tightening up on margin trading and a slew of new listings that have diverted cash.
On oil markets prices were mixed. US benchmark West Texas Intermediate for August delivery fell 6 cents to $59.64 while Brent crude for August gained 19c to $63.39.
Gold fetched $1 175.06 compared with $1 175.88 late on Thursday.
In other markets:
- Wellington rose 0.39% to 5 755.45.
Air New Zealand was up 1.97% at NZ$2.59 and Fletcher Building gained 0.62% to NZ$8.15.
- Taipei gave up 0.15% to end at 9 462.57.
- Manila gained 0.53% to 7 622.05.
SM Investments added 2.81% to 896 pesos and Philippine Long Distance Telephone put on 0.07% to 2 842 pesos, but SM Prime Holdings was down 0.2% at 19.96 pesos.
