Asian bourses trimmed losses late Monday, after posting steep declines in early trading as investors fretted about the relentless slide in energy prices. Declining manufacturing sentiment in Japan and a hostage incident in Sydney also dampened sentiment.
It comes after U.S. stocks finished sharply lower at the end of last week, with benchmark indexes posting sizable weekly losses, as crude's ongoing slide rattled investors. The Dow Jones Industrial Average declined 1.8 percent on Friday, down 3.8 percent from the week-ago close, its worst weekly loss since November 2011. Recording its worst weekly hit since May 2012, the S&P 500 plunged 1.6 percent while the tech-heavy Nasdaq Composite dropped 1.1 percent.
Brent crude gave up some of its gains and dropped towards $62 a barrel on Monday in volatile trading, which saw prices fall to a five-and-a-half-year-low after the IEA cut its outlook and then rise more than a dollar on hopes of improving manufacturing data. U.S. crude for January delivery was down 95 cents at $56.86 a barrel,after hitting a low of $56.25, down 2.7 percent, the lowest since May 2009.
"Today was going to be a rough day for trading in Asia," Richard Iley, chief economist for Asia at BNP Paribas told CNBC Asia's "Squawk Box. "Wall Street was down heavily [and] we got continued dramatic falls in oil prices... [With this] generalized pick-up in market volatility, there will always be red arrows today."
Business sentiment in Japan worsened in the fourth quarter, data showed on Monday. The big manufacturers index slipped to +12 from +13 in the previous quarter, below expectations for a reading of +13 in a Reuters poll, the Bank of Japan's Tankan survey showed.
India's wholesale price inflation eased for a sixth straight month in November, government data showed late Monday. The wholesale price index (WPI) was flat against a year earlier and compared with a 1.41 percent on-year jump forecast by economists in a Reuters poll.