World markets dropped on Monday, picking up where they left off after last week's Fed-inspired rally ran out of steam.

After a burst of enthusiasm on the back of the US central bank's decision to keep interest rates on hold for a little longer, screens were red across the world -- with the pace of decline sharply quickened.

The stay of execution for easy money served to bolster the Japanese yen, knocking the stuffing out of Tokyo which ended down 1.25 percent.

A stronger yen tends to make Japanese stocks less desirable.

Big markets in Asia and Europe followed suit, with Hong Kong, Shanghai, London, Paris and Frankfurt all shedding more than 1 percent by 0800 GMT.

Oil had appeared to offer some hope, after losing more than three percent on Friday, but could not hold onto its gains as the day wore on.

"Oil spot prices will have a big influence on where equities markets are going to trade for the early part of the week," said Angus Nicholson, a Melbourne-based analyst at IG Ltd.

"There are uncertainties over whether the OPEC members can reach an agreement," he told Bloomberg News, refering to a meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and Russia.

Two years of oversupply and OPEC's failure to forge any kind of consensus on how to deal with it have left observers sceptical of any change in direction at the meeting in Algeria this week.

On equities markets, Hong Kong spent the day in negative territory and its position worsened as the afternoon sawed on.

The Hang Seng Index shed 1.6 percent to close at 23,317.92.

The news was just as bad in Shanghai, where the benchmark Shanghai Composite Index dropped 1.8 percent to 2,980.43.

Sydney closed flat, while Taiwan gave up one percent and Seoul slipped 0.3 percent.

Monday's loss of altitude followed a disappointing Friday in the US, where the Dow slid 0.7 percent and the tech-rich NASDAQ gave up 0.6 percent. Shares in Apple and Yahoo led the charge downwards.

The yen was higher Monday, with currency traders apparently emboldened by last week's Bank of Japan move to target 10-year government bonds in its latest bid to fuel inflation.

The dollar was buying 100.62 yen in late-afternoon Asian trade against 101.02 yen in New York on Friday.

"The Bank of Japan has lost control of the yen," said Matthew Sherwood, head of investment strategy in Sydney at Perpetual Ltd.

"The only hope for Japan and the yen may be an aggressive Fed, but this is looking next to impossible despite an apparent split in the Fed Open Market Committee.”

Oil traders pushed both benchmarks moderately higher in early Asian trade, but retreated later.

West Texas Intermediate for November delivery was flat at $44.53 while Brent crude sat at $45.89. 

- Key figures around 0800 GMT -

Tokyo - Nikkei 225: DOWN 1.3 percent at 16,544.56 (close)

Hong Kong - Hang Seng: DOWN 1.6 percent at 23,317.92 (close) 

Shanghai - Composite: DOWN 1.8 percent at 2,980.43 (close)

Euro/dollar: UP at $1.1310 from $1.1128 late Friday

Dollar/yen: DOWN at 100.62 yen from 101.02 yen 

Pound/dollar: DOWN at $1.2938 from $1.2972

New York - DOW: DOWN 0.7 percent at 18,261.45 (close)

London - FTSE 100: DOWN 1.2 percent at 6,830.20 

Source: AFP