"Investors remained fearful on Monday over the Turkish lira's precipitous plunge - and the concerns that a financial crisis in the country would ripple through the rest of Europe", Spreadex analyst Connor Campbell said.
The lira hovered at around 7 lira per dollar on Monday, down almost 10 per cent on the day. Hong Kong's Hang Seng declined 0.7 per cent to 27,752.93 and Seoul's Kospi advanced 0.5 per cent to 2,258.91.
Stock prices for European banks with heavy investments in the country sunk on Monday.
The economic troubles in Turkey gripped global financial markets, with investors scrambling to determine whether and how far pain there would spread. "We go through the list of options they have to stop this: it involves rate hikes, getting the International Monetary Fund involved and restoring market confidence in the lira".
Contagion risks seem to be rising.
The diplomatic dispute has sent shockwaves through financial markets across the world as the plunging lira causing currencies in other developing countries to nosedive.
"In the framework of intraday and overnight standing facilities, the central bank will provide all the liquidity the banks need", the regulator said in a statement early Monday.
Market intervention to support the Turkish Lira has not been offered and worldwide pressure is mounting on Turkey to seek a political accommodation. Retail sales gained 8.8 percent, down from June's 9 percent.
Earnings are due this week from companies including Tata Steel, Maersk, Home Depot, China Unicom, Tencent, Cisco, Walmart, and Carlsberg.
Retail sales data in the U.S.is on Wednesday, followed by housing data on Thursday. Most retailers were down, but Amazon advanced 0.5 per cent.
Now, when we are considering U.S. wages that are grinding higher and indeed Trump's trade war on China that will only go onto contribute higher retail prices due to the USA import tariffs that will eventually feed through to retail outlets - then throw the US Q2 growth of 4.2% into the mix, then the Fed's path of rate hikes brings us back to the United States dollar liquidity crisis - which is perhaps an old/new paradigm for markets now which should keep the greenback underpinned for the forseeible future. While some are anxious that making an enemy out of Turkey will only result in grave consequences, others seem to have no qualms about walking away from America's alliance with the nation.
Nevertheless, the unexpected escalation of events that took place in the Europen trade resulted in the EuroStoxx-50 losing -1.9% - It sent the dollar on a strong rally through the 96 handle and the euro to trade below 1.1480, breaking the neckline support before then going onto trade below 1.14 the figure in NY for the first time since mid-2017. The euro slipped to $1.1410 from $1.1411.
As was the case during the various Greek sovereign debt crises in recent years, shares of various European banks that are believed to have high levels of exposure to Turkey, such as BBVA of Spain, BNP Paribas of France and UniCredit of Italy, have also seen their shares hit.
The lira tumbled to a record low of 6.97 to the dollar in early Istanbul trading on August 13, meaning it has lost 46 percent of its value this year.
South Africa's rand sank 3 percent to 14.5132 per dollar, the weakest since September 2016.
The yield on 10-year Treasuries was unchanged at 2.8732 percent.
The Nasdaq composite fell 19.40 points, or 0.2 per cent, to 7819.71.
In other commodity markets, gold was last down half a percent at $1,204 an ounce.