Adding to concerns of further global financial contagion was news Sunday that Belgium, the Netherlands and Luxembourg pledged more than euro11 billion ($16 billion) to Dutch-Belgian bank and insurance giant Fortis NV to keep it from insolvency.
"There's an increasing realization that the cleanup and the mending of all that's gone wrong is going to take an extended period to work through, and we're going to see an extended recovery period," said Jamie Spiteri, senior dealer at Shaw Stockbroking in Sydney.
Tokyo's Nikkei 225 index was down 1.3 percent at 11,743.61, and Hong Kong's Hang Seng Index shed 2.1 percent to 18,286.90.
"They're worried that another fire is starting in Europe," said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong, referring to the Fortis news.
In London, trading on the FTSE exchage got off to a weak start, despite the announcment that the British government was to nationalize troubled mortgage lender Bradford & Bingley.
The Treasury confirmed Monday that it would be taking over the bank's 50 billion pound ($91 billion) mortgage and loan books to preserve the country's financial stability.
The Treasury will also said it would spend 18 billion pounds ($33 billion to facilitate the sale of Bradford & Bingley's retail deposit business and branch network to Spanish banking group Santander.
Key stock indices in Seoul, Singapore and Sydney also declined, while benchmarks in New Zealand and the Philippines were marginally higher.
After days of intense talks, the White House and Congressional leaders agreed Sunday to a $700 billion public bailout of the ailing financial industry after lawmakers insisted on sharing spending controls with the administration of President Bush.
The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote Monday. It would give the administration broad power to use taxpayers' money to purchase billions of home mortgage-related assets held by cash-starved financial firms.
In Tokyo trading, automakers Toyota Motor Corp. and Mazda Mazda Motor Corp. fell after the Nikkei financial daily reported that the two companies were cutting production in China due to weaker demand.
Despite overall market weakness, Japanese banks managed to stay firm. Mitsubishi UFJ Financial Group Inc. added 2.4 percent, and Mizuho Financial Group Inc. edged up 0.6 percent.
U.S. stock index futures also fell, suggesting Wall Street would open lower Monday morning. Dow Jones industrial average futures were down 0.9 percent at 11,044, while Standard & Poor's 500 index futures were down 1.2 percent at 1,200.
Spiteri of Shaw Stockbroking said that participation in markets recently has been particularly thin.
"Despite the fact that share prices are easing, and you would think presenting some value out there, there's not a lot of new capital that has the capacity to take advantage of these depreciating share prices," he said.
In currencies, the dollar strengthened to 106.36 yen. The greenback also gained against the euro, which was trading at $1.4499.
Exchanges in mainland China were closed for a national holiday, and Taiwan markets were shut due to a typhoon.