Central banks in Asia have again intervened in the financial markets in an effort to restore stability after more than a week of turmoil.
European markets will be looking to rebound on Friday, after a late rally on Wall Street saw stocks recover.
The Bank of Japan pumped funds into the banking system for a second day to ease fears of a credit crunch. Australia's central bank also intervened.
There was a dramatic recovery on Wall Street, where the Dow Jones clawed back more than 300 points of its losses in the last hour of trading.
Share prices on Asian markets suffered further falls during trading on Friday, but not on the scale of a day earlier.
Shares were helped by talk that there may be a Federal Reserve rate cut soon.
Thursday saw chaos on world markets, with sharp falls in London.
However there were more sharp falls in Asia, as the Bank of Japan pumped funds into the banking system for a second day to ease fears of a credit crunch.
London's main FTSE 100 index slumped 4.1%, or 250 points, to end at 5,859, its steepest falls in four years. These sharp losses were echoed across Europe and Asia.
By 0630 BST, Tokyo's Nikkei 225 was down 4.2% or 674.3 points at 15,474.15.
But hours before the closing bell in New York, shares on Wall Street staged a dramatic recovery after suffering heavy losses earlier in the day.
Hong Kong's Hang Seng was down 3.3% or 688.8 points at 19983.6.
New York's Dow Jones index closed down 0.12%, or 15.7 points, at 12,845.8.
Central banks intervene
On Friday, Japan's Nikkei index fell 2.33% to hit it lowest point in nearly nine months. Earlier, the Bank of Japan said it would pump 1.2 trillion yen (US10.5bn, £5.25bn) into money markets.
The Bank of Japan injected 1.2 trillion yen ($10.7 billion; £5.4bn) into money markets, which was its third intervention of the week.
Stock markets around the world have been falling sharply since 9 August amid fears of a credit crunch triggered by the US sub-prime mortgage market crisis.
Japanese investors are worried that a slowdown in the US economy will hit exports from Asia.
Unrelenting slump
There is also speculation that the Bank of Japan could raise interest rates next week, despite the problems on the market.
Fears that the turmoil in the US sub-prime lending market will hit banks and snowball into serious economic problems deepened after the biggest US lender, Countrywide Financial said it was tapping an entire $11.5bn (£5.8bn) credit facility to help it conduct its day-to-day business.
Elsewhere, the Australian central bank intervened to support its currency for the first time for six years.
Traders are trying to work out if the current problems will continue
The Australian dollar was facing its biggest one day fall against the US dollar since it was allowed to trade freely in 1983.
Earlier in the week, Countrywide said that mortgage delinquencies had risen in July to five-year highs.
Meanwhile in the US there were also rumours that Bear Stearns, which is heavily exposed to the troubled mortgage sector, could get funding from a Chinese bank.
The deteriorating conditions at the company, which provides home loans to one in five US homeowners, was a huge blow to investor confidence in risky assets, such as shares, which as been gradually chipped away by the unrelenting slump in the US housing sector.
As US interest rates have risen and the housing bubble has burst, a growing number of borrowers who are either on low incomes or have patchy credit ratings have defaulted on their loans.
The crisis in this section of the mortgage market, known as sub-prime, has led to extensive financial difficulties for a number of investment funds with heavy exposure to the once lucrative sector and triggered fears of a wider financial crisis.
A government report that showed construction of new homes in the US in July sliding to 10-year lows and news that investment banking giant Bear Stearns will chop 240 jobs at its sub-prime division, worsened the mood.
Even further intervention by the Federal Reserve, which pumped an extra $17bn (£8.6bn) into the US banking system on Thursday to try and restore confidence seemed unable to allay concerns that the problems in the financial markets was a portent of what lay in store for the wider economy.
Over the past week, the Fed has now injected $88bn (£44.3bn), while the European Central Bank has put up 211bn euros ($283.2bn; £142.6bn).
But the action of the central banks has been largely dismissed and tens of billions of pounds has now been wiped off the value of the UK's leading shares alone since last Wednesday, with financial and mining stocks the worst off.
