The falling dollar, more subprime-related bad news and a grim overnight close on Wall Street set the mood for falls of two to five per cent on major Asia-Pacific stock markets on Tuesday. Even Chinese markets, often immune to large swings elsewhere in Asia, fell by nearly five per cent.

The Morgan Stanley Capital International Asia-Pacific Index had slumped 2.8 per cent to 162.71 by 3:24pm in Tokyo, Bloomberg reported, its biggest decline since August 17.