Many of the region's major benchmarks opened higher but shed their gains and were in the red at midday. Only major indices in China and the Philippines held up against the negative swing.
Japan's Nikkei 225 index lost 0.4 percent to 12,987.37 points. Hong Kong's blue-chip Hang Seng Index was off 1.3 percent at 21,901.95.
The declines came after the U.S. Federal Reserve said Sunday it was granting its New York branch authority to lend to the two mortgage giants "should such lending prove necessary." The measure allows Fannie Mae and Freddie Mac to borrow from the central bank at 2.25 percent — the same rate given to commercial banks and big Wall Street firms — should they need short-term funding in the face of a slumping U.S. housing market.
The Fed said the step would help both firms "promote the availability of home mortgage credit during a period of stress in financial markets."
The move may have comforted some investors after Friday's failure of IndyMac Bancorp Inc., one of the largest U.S. bank meltdowns in decades, analyst said. But it also left many speculating on the depth of credit and mortgage problems in the world's largest economy, a vital consumer of Asian-made goods.
Japan's benchmark rose 1.1 percent before falling back. Losses in shares of Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., both of which had made early gains, weighed on the broader market.
In Hong Kong, losses spread across most sectors. Handset manufacturer Foxconn International Holdings, Motorola's primary contract manufacturer, was among the worst hit, down almost 8.5 percent.
Mainland China's Shanghai Composite index rose slightly, 0.5 percent, to 2,869.7 points. Analysts said mining companies helped the market.
In currency dealings, the U.S. dollar rose against the yen to 106.53.
Source: http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/world_markets;_ylt
=Agy2EL0sMQgnO7Axue1hSDGyBhIF