Japanese benchmark Nikkei declined 0.10 percent or 8.38 points to 8775.51, Hong Kong's Hang Seng fell 0.63 percent or 123.36 points to 19435.85 and Chinese Shanghai Composite declined 0.75 percent or 15.50 points to 2043.65, while South Korean KOSPI Composite slipped 0.29 percent and India's BSE Sensex fell 0.13 percent.
Market participants opt for caution as the ECB meeting approaches, where president Draghi is expected to unveil his plans for purchasing sovereign debt to help lower Spanish and Italian bond yields. Recent comments from ECB President Mario Draghi and other Governing Council members have suggested that interventions will be large enough to reach their objective. Manufacturing activity in the euro area contracted for the 13th straight month in August and also raised expectations that the central bank will cut interest rates to record lows at its monetary policy decision Thursday.
Investors are also likely to focus on the U.S. Institute for Supply Management manufacturing (ISM) data due later in the day and the on-farm payrolls report Friday. The manufacturing activity in the world’s largest economy is likely to rise to 50.4 in August compared to 49.8 in the previous month. Any unexpected weakness in the ISM data would add to the urgency of Bernanke’s call for more monetary stimulus made last week at Jackson Hole.
Bernanke said the central bank was prepared to take further steps to strengthen the economy if necessary, which was interpreted by market participants as a stronger push for QE3 than before. However, non-farm payrolls report could swing things the other way again as a big jump in the jobs report could stop the central bank from taking additional measures at its upcoming Fed Open Markets Committee meeting.
"The ECB meeting this week is important, but the U.S. ISM index will also be key, because if these numbers are bad there is chance things will turn worse," Chung Seung-jae, an analyst at Mirae Asset Securities in Seoul, told Reuters.
Meanwhile, Moody's Investors Service lowered its outlook for the European Union's AAA credit rating to negative from stable late Monday and also warned that it might downgrade the block’s rating if it decides to lower that rating of Germany, France, UK and The Netherlands, which together account for around 45 percent of the EU's budget revenue.
In Tokyo, Softbank Corp. declined 2.37 percent and Hokkaido Electric Power Co. fell 2.26 percent while Sharp Corp. climbed 12.37 percent after declining for three consecutive days.
Agile Property Holdings Ltd. plunged 4.65 percent and Sino Land Co. Ltd. declined 2.15 percent in Hiong Kong, while Sany Heavy Industry Co. Ltd. slumped 5.88 percent in Shanghai.
In Seoul, Hyundai Motor fell 2.28 percent and LG Electronics plunged 2.23 percent while Kia Motors Corp. slipped 2.51 percent.