Most Asian markets tumbled Friday in the wake of one of Wall Street's biggest drops of the year, although European markets rebounded modestly from sharp losses the previous day.

Japanese stocks fell to nearly three-month lows, Philippine stocks marked their steepest decline in 10 years, and South Korea's benchmark index — which had hit a record Wednesday — sank 4.1 percent, its biggest slide in more than three years. Chinese stocks, however, ended the day flat.

Investors in Asia were rattled after U.S. and European markets plunged Thursday amid worries over the U.S. mortgage and corporate lending markets. Those woes could cause global liquidity to dry up as international investors pull out of riskier assets, including Asian emerging markets, analysts said.

"If big foreign funds have selling orders, they tend to go by region. If they sell Asia funds, they do it to reevaluate portfolios or cover losses in the U.S.," said Rommel Macapagal, chairman of Westlink Global Equities, in Manila.

"But for local investors, it's a sentiment. When big drops occur, they tend to get jittery because of expectation of foreign funds selling. They tend to get out," he said.

In Tokyo, the Nikkei 225 index sank 418.28 points, or 2.36 percent, to close at 17,283.81 — nearly a three-month low. Concerns about the yen's recent strength, which hurts exporters, and uncertainty over weekend parliamentary elections also weighed on the Japanese market.

The sell-offs in Asia came after stunning rallies in the region — markets in South Korea, China and India hit records just this week — and some investors viewed Wall Street's drop as a good opportunity to sell and lock in their profits.

Hong Kong's Hang Seng index fell 2.8 percent, while stocks in the Philippines tumbled 3.9 percent, their biggest drop since 1997. Taiwan's benchmark index fell even more, dropping 4.2 percent. Australia's benchmark index slid 2.8 percent, its biggest decline since 2001. Indian stocks were down more than 3 percent.

But as the global day progressed, key European markets, which had fallen sharply Thursday in reaction to the slide on Wall Street, climbed higher Friday.

The U.K.'s FTSE 100 index, which had tumbled 3.2 percent Thursday — its worst single-day percentage drop since March 2003 — was up 0.2 percent to 6,261.00. France's CAC-40 index gained 0.7 percent to 5,712.37, while the German DAX 30 index slipped 0.1 percent to 7,499.51.

U.S. stocks plunged Thursday amid mounting concerns that sluggish home sales and continued defaults in subprime loans would spur debt defaults and weigh on corporate earnings. Investors also worried that higher corporate borrowing costs will curb the rapid pace of takeovers that had driven stocks higher this year.

The Dow Jones industrial average sank 311.50 points, or 2.26 percent, to 13,473.57, its biggest point drop since Feb. 27, when a drop in the Shanghai market sparked a global rout.

This time, however, Chinese markets remained steady. The benchmark Shanghai Composite Index slipped just 0.03 percent after hitting an all-time record high on Thursday.

The drop in Japanese shares was aggravated by the yen's rise to a three-month high versus the dollar, which fell as low as 118.02 yen. Later it recovered some to 118.56 yen, but that was still down sharply from 119.46 yen late Thursday in New York.

"A stronger Japanese yen has a greater impact on today's Nikkei than overnight losses on U.S. stocks," said Hiroyuki Fukunaga, chief strategist at Rakuten Securities.

Investors in Tokyo were also worried about Sunday's upper house elections in Japan. Recent newspaper polls have predicted that the long ruling Liberal Democratic Party could win fewer than a third of the seats up for grabs.

A defeat would not immediately threaten its hold on power, but Prime Minister Shinzo Abe could face pressure to resign from other leaders within his party and from the public.