Asian markets tumbled on Monday and the euro sank as eurozone fears returned on news that Cyprus was planning to tax bank depositors as part of a controversial bailout.
Wall Street also provided a weak lead, with the Dow seeing its first loss after a 10-day rally as data pointed to ongoing softness in the US economy.
Tokyo fell 2.71 percent, or 340.32 points, to end at 12,220.63, Sydney slipped 2.05 percent, or 104.8 points, to 5,015.4, a two-week low, while Seoul ended 0.92 percent lower, sliding 18.32 points to 1,968.18.
Hong Kong lost 2.00 percent, or 449.75 points, to end at 22,083.36 and Shanghai shed 1.68 percent, or 38.39 points, to 2,240.02.
Investors have been spooked by news that Cyprus agreed to a levy of up to 10 percent on bank depositors as part of a deal with fellow eurozone countries and international creditors in order to qualify for a $13 billion bailout.
Deposits of more than 100,000 euros (US$129,000) will be hit with a 9.9 percent charge and 6.75 percent for anything below that threshold.
The proposal must still be passed by parliament.
President Nicos Anastasiades said in a televised address Sunday the tax was the "least painful" option for the recession-hit island and vowed to try to persuade the eurogroup to "limit the impact on small depositors".
While bank customers have voiced dismay and anger at the plan, global markets were jolted amid fears it could reignite the eurozone debt crisis and hit confidence in other troubled countries such as Spain and Italy.
In early European trading shares in London, Paris and Frankfurt slumped between 1.5 percent and 2.0 percent.
"The feeling is that the euro crisis could be back and that you could see full on contagion, that's why you're seeing the market reaction today," said Shane Oliver, head of investment strategy and chief economist at Amp Capital in Sydney.
"But I suspect that we are going to hear reassurances from other countries that Cyprus is different and that this plan will not be put in place elsewhere," he told Dow Jones Newswires.
On currency markets the euro fell to US$1.2933 and 122.75 yen from US$1.3075 and 124.61 yen in New York Friday.
The US dollar dropped to 94.88 yen from 95.26 yen, although it received some measure of support from expectations that the new leaders of the Bank of Japan will unveil a fresh round of monetary easing to jumpstart the economy.
In other markets:
-- Taipei fell 1.47 percent, or 116.15 points, to 7,811.34. Taiwan Semiconductor Manufacturing Co. was 2.4 percent lower at Tw$100.5, while leading smartphone maker HTC rose 2.3 percent to Tw$240.0.
-- Manila fell 1.78 percent, or 118.42 points, to 6,536.18. Philippine Long Distance Telephone slipped 1.8 percent to 2,790 pesos and SM Investments plunged 4.2 percent to 1,033 pesos.
-- Wellington fell 1.05 percent, or 46.03 points, to 4,341.02. Fletcher Building eased 3.83 percent to NZ$8.80 and Contact Energy was down 1.25 percent at NZ$5.52 but Telecom rose 2.24 percent to NZ$2.28.