After a volatile trading session, Asian markets ended mostly lower as caution prevailed amid worries about the health of the U.S. economy -- the region's top export destination.
Sentiment took a hit after a survey showed U.S. consumer sentiment fell in November to the lowest in two years. This followed comments from Treasury Secretary Henry Paulson, who told the Wall Street Journal he expects a wave of mortgage defaults next year.
This led to a sharp selloff in the Chinese market. The Shanghai Composite Index was the worst performer in Asia, dropping 4.4 percent to 4,984, sliding past the key 5,000 mark for the first time in three months.
The Hang Seng Index tracked those losses, wiping out its gains earlier in the session to end 2.3 percent lower.