A run of solid economic reports have ratcheted up expectations that the Fed may decide to begin to taper the $85 billion of monthly asset purchases at its policy meeting on December 18.
Since the stimulus has over the past few years helped shore up stock markets, its potential withdrawal has raised concerns, even if it is predicated on an improving economic outlook. Stocks have had a bad start to December after solid gains beforehand.
The big economic release this week will be Friday's official nonfarm payrolls data for November. The private payrolls report from ADP on Wednesday raised speculation that the government figures will be strong. ADP said the US economy generated 215,000 jobs during November, more than the consensus in markets for a 165,000 or so increase. October's increase was also revised up to 184,000.
"The market is trying to work out whether good news is bad but clearly this report argues in favor of a December tapering," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.
In Europe, the FTSE 100 index of leading British shares was down 0.6 per cent at 6,491 while Germany's DAX fell 1 per cent to 9,129. The CAC-40 in France was 0.8 per cent lower at 4,139.
US stocks were poised for further falls at the open, with Dow futures down 0.2 per cent and the broader S&P 500 futures 0.3 per cent lower.
The dollar's near-term fortunes could lie on Friday's payrolls data. Ahead of the publication, it was fairly flat, with the euro down 0.1 per cent at $1.3569 and the dollar unchanged at 102.55 yen.
Earlier in Asia, most markets were under pressure. Japan's Nikkei 225 was the clear loser, closing down 2.2 per cent to 15,407.94 from near six-month highs. Hong Kong's Hang Seng fell 0.8 per cent to 23,728.70 and South Korea's Kospi slid 1.1 per cent to 1,986.80.
But China's Shanghai Composite added 1.3 per cent to 2,251.76 and Australia's S&P/ASX 200 gained 0.3 per cent to 5,273.75.
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