Hong Kong shares fell 1.73% and Sydney shares dipped 0.17%.

Tokyo's market, meanwhile, was closed for the Emperor's birthday, a national holiday.

Tokyo's key Nikkei stock index had dropped 373.50 points, to close at 13,779.45 on Tuesday - its lowest close since October 30.

Share prices fell on fears that declines in the bond market would further hurt Japan's ailing banks.

On Wednesday, Hong Kong's Hang Seng index had also tumbled to 10,143.95 by midday.

It was pulled down by selling of shares in China Telecom after regulators insisted on steep cuts in fees from suscribers in certain regions.

Dow holds up

The US Federal Reserve wrapped up a tumultuous year in world financial markets by keeping America's interest rates unchanged, holding its fire until it sees evidence of a widely expected slowdown in domestic growth next year.

The news dampened Wall Street's pre-Christmas rally although the Dow Jones index, the key barometer of the New York Stock Exchange ended the day 55.61 points up at 9,044.46.

Trade slows down

Traders on the London Stock Exchange, meanwhile, were expecting another quiet day as trade began to wind down for Christmas.

In Europe, the markets are also preoccupied with getting ready for the launch of Europe's new single currency on 1 January 1999.

The FTSE 100 index had a bad day on Tuesday.

It closed down 33 points at 5,843 as the traditional Santa Claus share rally dried up.

Brokers said that investors had taken some profits and locked in recent gains.

Positive Europe

On the continent, though, Frankfurt's Dax index held on to a 44 point gain, ending Tuesday at 4,825. The Bourse de Paris was up 17 with the Cac 40 closing at 3,820.

The odd one out was Zurich, were the SMI lost 79 points dropping to 7,091.