Stocks in the United States have fallen on concerns over corporate earnings and falling retail sales.
The Dow Jones industrial average fell 59.42 points, or 0.69%, to 8,519.69.
Standard & Poor's 500 Index was down 16.25 points, or 1.83%, at 871.63. The Nasdaq Composite Index gave up 31.97 points, or 2.04%, at 1,532.35.
Trading was thin for most of the session and is expected to be light for the rest of the week which will be shorter due to the Christmas holiday.
Only six trading days remain this year and the markets are facing their worst yearly performance since the 1930s.
Shares in General Motors Corp sagged despite an announcement of a $US17.4 billion lifeline from the US government on Friday. GM was down 21.6% at $US3.52.
Shares of Toyota were down 5.4% at $US60.88 after the company said it was impossible to predict how severely the current "unprecedented emergency" would cut the global demand for cars next year.
Retailers were also down. J.C. Penney Inc shed 5.8% to $US18.77, and Liz Claiborne Inc lost 7.2% to $US2.98.
Trading was low on the New York Stock Exchange, with about 1.22 billion shares changing hands. About 1.66 billion shares were traded on the Nasdaq.
European shares in red
European shares closed 1.7% lower on Monday as volumes dwindled at the start of Christmas week.
The FTSEurofirst index of top European shares closed at 809.78 points. The index has shed nearly half its value so far this year in a credit crisis that has driven several major economies into recession.
The Paris CAC 40 fell 2.31% and the Frankfurt Dax was down 1.23.
In London, the FTSE 100 index was down 37.77 points, 0.9%, at 4,249.16. The index closed down 1% on Friday.
Earlier in the day, China cut interest rates and Japan warned it was sliding deeper into a recession.
Contributing to the gloom, the Organisation for Economic Cooperation and Development warned that up to 25 million people around the world could lose their jobs between now and 2010.
Auto shares fell after Toyota forecast its first operating loss due to a global slide in car sales and a rise in the yen.
Volkswagen fell 5.9%. BMW, Daimler, Peugeot and Renault fell 1.5% - 4.6%. French tyremaker Michelin fell about 3% after saying it is cutting operations to cope with a decline in demand for tyres.
Oil shares also fell as crude dropped more than 2%.
Shares in Hong Kong earlier fell 3.3% and Shanghai was down 1.52%. However, in Tokyo, the Nikkei index rallied by 1.57% at the close.
In Australia on Monday, the S&P/ASX200 index was down 58.3 points, or 1.61%, to 3557.4 points, while the All Ordinaries index was down 54.9 points, or 1.55%, to 3492.3 points.
On the Sydney Futures Exchange, the March share price index futures contract was down 56 points to 3543 points on a volume of 12,630 contracts.
The NZX 50 index closed up 24 points to 2679 on turnover of $28 million.
Telecom was unchanged at $2.26 and Contact Energy was unchanged at $7.05.
Fletcher Building gained 27 cents to $6.10, Mainfreight gained 12c to $4.60, The Warehouse lost 1c to $3.53 and PGG Wrightson lost 10c to $1.05.
The New Zealand dollar was trading at 57.63 US cents, 84.55 Australian cents, 38.62 pence, 51.94 yen and 0.4121 euro. The Trade Weighted Index was 56.22.