Australian stocks are set to start the week in the red, as emerging markets continued to tumble amid fears of a slowdown in China and as the US Federal Reserve considers a further wind-back of its stimulus program.

In contrast to the optimism in financial markets last year, which saw US stocks soared to record levels and Australian shares post their best performance since 2009, analysts warn volatility could become this year’s hallmark.

Asian share markets slid to multi-month lows on Monday. Japan’s Nikkei 225 plunged more than 2.2 per cent to take this year’s falls to more than 7.6 per cent.

South Korea’s KOSPI was 1.3 per cent lower in late trade as Hong Kong’s Hang Seng Index slipped by 2.1 per cent.

Australia’s SPI futures index was down 40 points at 5157 points on Monday.

‘‘The emerging markets have had a pretty savage pull-back, while Chinese equities are looking pretty average,’’ Market Matters stockbroker and principal Shawn Hickman said.

‘‘So we get caught up in that downdraft probably a lot more than the US market, which was at all-time highs.’’

The wobbles in financial markets saw a further demand for safe haven assets, with gold rallying 2 per cent to reach a two-month high of $US1272.03 an ounce.

The precious metal shed 28.3 per cent of its value last year.

The widespread losses came as the US central bank was tipped to taper its $US75 billion-a-month ($86 billion-a-month) bond-buying program again this week.

Emerging markets and currencies were hit badly in mid-2013 when the prospect of tapering was first raised.

Even so, analysts said the current bearish mood in financial markets was likely to be more heavily driven by concerns about a financial crunch in China, Australia’s largest trading partner.

Ongoing local crises in some emerging economies such as Argentina, Turkey and Thailand were also weighing on expectations of a healthy recovery in the global economy this year.

The S&P’s 500 Index shed 2.1 per cent on Friday to 1790.31 points, its lowest level since mid-December, as  negative sentiment spread following the release of a soft reading of manufacturing activity in China from HSBC and financial data firm Markit on Thursday.

The Dow Jones Industrial Average to weakened by 2 per cent to close the week at 15879.11.

‘‘The impression one gets of emerging markets is that they are more vulnerable and jumpy this year,’’ RBS senior currency strategist Greg Gibbs said, adding that the weakness in the Australian dollar appeared to be reflecting traders’ weariness about China.

The Australian dollar lifted off its Friday low of US86.60¢, but could remain under pressure if the Fed trims its asset purchases for the second-straight month. The stimulus reduction is expected to strengthen the US dollar.

The local currency’s struggles could also be extended this week through the sell-off of banking stocks, Mr Hickman said.

‘‘What was hurting us and what will hurt us more is the strong sell-off in the Australian dollar. It will probably lead to more sell-off in the banks,’’ Mr Hickman said. The S&P/ASX200 financial sector index fell 1 per cent last week, following a 1.8 per cent loss in the previous week. In contrast, the sector gained 23.6 per cent in 2013.

Further possible gains in the local share market, after last year’s strong performance, would have to come from signs of earnings growth and improving economic data, JBWere executive director Mike Kendall said.

‘‘The markets have run pretty hard but I think there’s a lot of people out there questioning where’s the value,’’ Mr Kendall said. ‘‘We’d like to keep pushing forward, but we need a reason. We’re probably in for a choppy couple of months as people work out what the economic outlook is like.’’

Mr Kendall said investors could calm down if there is a stronger final reading of HSBC/Markit’s Chinese manufacturing index on Thursday. Official manufacturing data for January will be released by the Chinese government on Saturday.