Asian equities closed mostly lower on Monday, with the Shanghai Composite significantly paring losses amid talk that Beijing will halt its controversial market intervention. A report by The Financial Times over the weekend said Beijing will abandon large-scale share purchases, sparking concerns over more declines for A-shares and sending Dow futures tumbling by more than 200 points in the Asian session. Beijing may now switch its focus from intervention to stopping those it believes are "destabilizing the market," the FT report said. Suspected state firm buying has propped up A-shares in recent sessions, resulting in two straight days of 5 percent rallies in Shanghai last week. Read MoreMarkets are a mess, but don't blame China: Pro

Meanwhile, fresh commentary from Federal Reserve officials over the weekend created further uncertainty over when the U.S. central bank will finally tighten monetary policy. Fed Vice Chairman Stanley Fischer told CNBC at the Jackson Hole symposium that it was too early to tell whether the case for a September interest rate hike is compelling. U.S. stocks saw a mixed close last week, with the and the Nasdaq eking out slim gains but the closed down 12 points. The S&P 500 also entered a Death Cross—often seen to indicate an impending bear market—with the 50-day moving average falling below the declining 200-day moving average for the first time since August 2011.

Shanghai down 0.8% China's benchmark Shanghai Composite more than halved its losses after falling as much as 3.7 percent earlier in the day. Still, the index snapped a two-day winning streak. Meanwhile, Hong Kong shares finished the day 0.27 percent higher after swinging between gains and losses. Attention was on Beijing's official August purchasing manager's index (PMI) report due on Tuesday. A Reuters poll expects manufacturing activity likely hit a three-year low at 49.7, which may exacerbate market losses. The private Caixin/Markit August PMI, which tracks smaller companies, is also on tap Tuesday. A-shares of Bank of China, and Industrial and Commercial Bank of China fell 1 percent each after warning of rising bad loans last week. Investors also reacted to supportive remarks from Premier Li Keqiang and new reforms over the weekend. In remarks published on Saturday, Li said China would "enact more targeted and responsive macro-regulation to offset downward economic pressure, [and] more robust reform and innovation efforts to energize the market." Meanwhile, parliament passed a plan to cap outstanding local government debt at $2.5 trillion this year in an effort to stem escalating borrowing. Local governments racked up around $2.9 trillion in debt as of end-June, according to official estimates. Reforms like these will help restore investor confidence in the economy and markets, said analysts at ING in a morning note.

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