Holidays in Japan, China and South Korea meant trading was thin in Asia, while politics added extra uncertainty with elections in Canada and Germany bookending the week.
Shares in China Evergrande plummeted 10.2% after earlier losing as much as 19% to more than 11-year lows. The company's listed units also fell, as investors worried about the real estate developer's ability to repay a small portion of its $305 billion debt due this Thursday.
Evergrande's troubles added to growing unease about the health of China's economy after Beijing's recent crackdown on tech firms. The Hang Seng index shed 3.3%.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.7% to its lowest since Aug. 24, with Australia stocks suffering their worst session in nearly seven months, slumping 2.1%.
The MSCI All Country World Index fell 0.6%, close to a one-month low and down further from record highs hit earlier this month.
"The imminent demise of China's leading property company raises questions about risks of contagion and possible spillover effects to the economy and the global recovery," TS Lombard's Larry Brainard and Jon Harrison wrote in a strategy note.
Beijing will move aggressively to "ringfence" the Evergrande crisis and ensure growth remains on track in 2022, they wrote.
China sovereign credit default swaps (CDS) jumped nine basis points from Friday's close to 45 basis points, the highest since early October, IHS Markit data showed, while the CDS of other emerging market giants, including Brazil and Turkey, also rose to multi-month highs.
Surging gas prices, and the potential feed through to inflation, provided another headache for traders.
Higher global wholesale power and gas prices have prompted concerns of high winter energy bills and shortages, having already forced some energy supplies out of business in Britain.
Dow Jones futures were down 1.6% and S&P 500 futures declined 1.4%, after all three Wall Street indexes marked weekly losses on Friday following days of turbulence.
The Fed is still expected to lay the groundwork for a tapering at its policy meeting on Tuesday and Wednesday, though the consensus is for an actual announcement to be delayed until the November or December meetings.
Yields on 10-year Treasuries were last at 1.3231%, falling away from a two-month top and the curve flattened ahead of the meeting.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched its highest since Aug. 27, before easing back.
"A flatter yield curve suggests some fears the Fed may overdo the eventual hiking cycle," said Tapas Strickland, a director of economics at NAB.
He noted only 2-3 FOMC members would need to shift their "dot plot" forecasts for a hike in 2022 to make it the median, given seven of 18 had already tipped a move next year.
Germany's 10-year yield, the benchmark for the euro zone, was down more than a basis point to -0.319%, holding below the 10-week high touched on Friday after a report suggested the European Central Bank (ECB) expects to hit its inflation target by 2025.
In comments seen as setting the scene for a further slide in the pace of bond buying, ECB board member Isabel Schnabel said the volume of the ECB's bond purchases was becoming "less important" as the economic outlook improves.
Investors were also keeping an eye on a dozen other central bank meetings spanning Japan, Indonesia, the Philippines, Taiwan, Britain, Switzerland, Sweden, Norway, Brazil, South Africa, Turkey and Hungary.
The Norges Bank is expected to become the first G10 central bank to lift rates on Thursday.
Lofty U.S. yields and general risk aversion in the markets sent the dollar to a four-week high against a basket of other currencies. The U.S. dollar index was last at 93.386.
The dollar was range bound versus the yen at 109.52, while the euro was at its lowest since Aug. 27 at $1.1706 due to uncertainty ahead of Germany's election.
The offshore Chinese yuan skidded to three-week lows, falling to 6.4698 yuan per dollar, its lowest since Aug. 31.
Canada goes to the polls on Monday with the race too close to call.
The stronger dollar kept oil under pressure, with crude also taking a hit from energy companies in the U.S. Gulf of Mexico resuming production after back-to-back hurricanes in the region shut output.
Brent fell 1.7% to $74.06 a barrel, while U.S. crude lost 2% to $70.5.
Gold prices hit a more than five-week low, before recovering to trade up 0.2% at $1,757 an ounce.
(Reporting by Tom Arnold in London, Anushka Trivedi in Bengaluru and Wayne Cole in Sydney Graphic by Sujata Rao Editing by Jane Merriman and Mark Potter) ((Anushka.Trivedi@thomsonreuters.com; +918061823241;))