Australian shares have fallen sharply to touch their lowest level in five weeks, as mining stocks declined, while major banks tracked a sell-off on Wall Street overnight.
The ASX 200 closed down 141 points or 2 per cent to 6,846.
By 4:15pm AEST, the Australian dollar was down at 68.24 US cents.
Almost all 11 sectors finished the session lower.
Export-reliant miners were the top losers on the benchmark index, shedding 5.3 per cent.
Iron ore futures skidded overnight after a survey raised doubts about a rebound in China, the world's top steel producer and consumer.
Sector behemoths BHP, Rio Tinto and Fortescue shed between 2.1 per cent and 7.6 per cent.
BHP, with its 7.6 per cent fall, was one of the biggest laggards on the local bourse, marking its worst day in over six months as the company traded ex-dividend.
Financials fell 1.3 per cent, with all "Big Four" banks sliding between 0.8 per cent and 1.8 per cent.
The Australian Prudential Regulation Authority (APRA) said the country's third-largest lender, Westpac, no longer needed to keep an additional amount of cash reserve after the bank took steps to rectify issues related to the regulator's liquidity requirements.
Westpac shares dropped 1.8 per cent in tandem with broader market moves.
Energy stocks skidded 2.2 per cent after oil prices slipped overnight on worries of a hit to the global economy from renewed COVID-19 restrictions in China.
Sector leaders Woodside Energy and Santos dropped 2.3 per cent and 2.8 per cent respectively.
World stocks lower
Overnight, US stocks ended the month with their fourth straight daily decline, cementing the weakest August performance in seven years as worries about aggressive interest rate hikes from the Federal Reserve persist.
Adding to pressure were declines in the technology sector, and more specifically chipmakers, after soft forecasts from Seagate and HP.
The three main indexes suffered their biggest monthly percentage declines in August since 2015.
After hitting a four-month high in mid-August, the S&P 500 has stumbled in recent weeks, dropping more than 8 per cent through Wednesday's close and falling through several closely watched technical support levels.
Selling pressure accelerated after Fed Chair Jerome Powell's hawkish remarks on Friday about keeping monetary policy tight "for some time" dashed hopes of more modest interest rate hikes, with the benchmark index down more than 5 per cent over the past four trading sessions.
"All [Powell] cares about is getting inflation down and raising rates to do that, and in terms of how aggressive to be that is all to be determined from the data," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
"Right now we are in this flip back-and-forth market, a lot of volatility, concerns the rally we did have was just a bear market rally, probably some concern we will go back down to new lows."
Cleveland Federal Reserve Bank president Loretta Mester said on Wednesday the central bank will need to boost interest rates somewhat above 4 per cent by early next year and hold them there in order to bring inflation back down to the Fed's goal, and that the risks of recession over the next year or two have moved up.
The Dow Jones Industrial Average fell 280 points, or 0.9 per cent, to 31,510; the S&P 500 lost 31 points, or 0.8 per cent, to 3,955; and the Nasdaq Composite dropped 67 points, or 0.6 per cent, to 11,816.
For the month, the Dow fell 4.1 per cent, the S&P 500 lost 4.2 per cent and the Nasdaq declined 4.6 per cent.
Adding to investor nervousness, stocks are also heading into a historically weak period for the market in September.
"September is usually the worst month of the year: it and February are the only ones to post average declines, but September is the only month of the year to fall more than it rises so it could end up being sort of a self-fulfilling prophecy," said Sam Stovall, chief investment strategist at CFRA in New York.
Meanwhile, the MSCI all-country stock index slipped 0.2 per cent and was down 18.5 per cent for the year as war in Ukraine, surging energy prices and rising interest rates took their toll on risky assets.
Europe's STOXX share index of 600 companies slumped 1.1 per cent to a six-week low, leaving it down almost 15 per cent for the year.
Economic news remained grim with overnight data showing economic activity in China, the world's second-largest economy, extended its decline this month after new COVID-19 infections, the worst heatwaves in decades and struggles in the property sector.
Headline eurozone inflation for August rose to another record high, beating expectations and solidifying the case for a hefty rate hike by the European Central Bank on September 8.
Russia halted gas supplies via a major pipeline to Europe on Wednesday for three days of maintenance amid fears it won't be switched back on, adding to worries of energy rationing during coming winter months in some of the region's richest countries.
On the oil markets, Brent crude was down, trading at $US95.01 a barrel by 4:24pm AEST.
ABC/Reuters
