Continuing uncertainty over the US debt situation drove the Australian sharemarket almost 1 per cent lower as investors sold financial stocks amid thin volumes.
At the close on Monday, the benchmark S&P/ASX 200 Index was down 46.9 points, or 0.9 per cent, at 5161.1. The broader All Ordinaries was down 45.3 points, or 0.87 per cent, at 5160.6.
If Democrats and Republicans do not resolve their differences on the US debt ceiling by October 17, the government could default on its debt.
IG market analyst Stan Shamu said the latest headlines had rattled investor confidence while three states had a public holiday on Monday. "Everyone now thinks the parties are still quite far apart and this has been quite negative for markets," he said.
Australia's big four banks led the falls on Monday as credit markets came under threat due to the uncertainty in the US.
"The natural reaction was to sell off financials," Mr Shamu said.
The negativity would remain until certainty returned to the US.
Among the big banks, ANZ was down 30¢ at $30.46, Westpac fell 19¢ to $32.23, Commonwealth Bank lost $1.01 to $70.75, and National Australia Bank dropped 41¢ to $34.40.
Global miner BHP Billiton was off 45¢ at $34.68, while Rio Tinto dropped 47¢ to $60.
Blood products and vaccines supplier CSL was 93¢ weaker at $64.11 after it said it expected settlement of an antitrust class action in the US would reduce its fiscal 2014 net profit by $US39 million ($41.31 million).
The price of gold in Sydney was $US1314.27 an ounce, down $US4.13.
Elsewhere, the bond market was slightly weaker on a quiet day, with many traders on a public holiday.
There has been little movement in prices, with the US government shutdown failing to deliver the flight to safe assets that many have been expecting.
Economic data to be released this week will be important for the timing of the Reserve Bank's next cash-rate move.
The first cab off the rank is NAB's monthly business survey, to be released on Tuesday. On Thursday, the Bureau of Statistics will release the September jobs data, which is expected to show the unemployment rate steady at 5.8 per cent.
The dollar eased slightly from US94.31¢ to US94.22¢.