Investors have taken 0.9 per cent from the Australian share market's value to start the week, as the US dollar steadied on expectations a Democrat-controlled US Congress will pass more economic stimulus and help inflation.
The S&P/ASX200 benchmark index closed lower by 60.7 points, or 0.9 per cent, to 6697.2 on Monday.
The All Ordinaries closed down 64.7 points, or 0.92 per cent, at 6959.5.
The indices fell almost 0.4 per cent at 1200 AEDT, then slipped further.
US futures dropped too.
Most ASX sectors were lower, and information technology fared worst, down 2.24 per cent.
Pepperstone chief market strategist Chris Weston examined the US bond market and said yields showed great expectations of inflation.
"Global yields are moving up and putting bids into the US dollar," he said.
The Aussie dollar has slipped below 77 US cents.
"All the trades that have been good hedges against a weaker US dollar are being unwound," Mr Weston said.
"There is a view we could see a stronger US dollar in the short term. That would negatively affect the equity market as well."
The Democrats last week secured power in US Congress by winning two key Senate seats.
Most people expect this will help President-elect Joe Biden deliver more economic stimulus, and lead to inflation.
IG Markets analyst Kyle Rodda said there was no direct catalyst for the falls in many markets.
However signs from bonds investors, along with the recovery of the US dollar, cooled sentiment, he said.
Meanwhile, the Democrats are set to try and impeach President Donald Trump, furious he incited rioters to storm the Capitol building in Washington last week.
Domestically, Brisbane residents will end a three-day coronavirus lockdown at 6pm AEDT on Monday.
They have been largely confined to their homes since a cleaner at a quarantine hotel was diagnosed with a highly infectious strain.
Victoria will reopen to regional NSW as the latter state keeps infections low after an outbreak in Sydney in December.
On the ASX, energy was the best performing sector, up 0.74 per cent.
Oil prices rose by eight per cent last week after Saudi Arabia pledged to cut output.
Santos closed higher by 3.15 per cent to $7.20 and Woodside Petroleum lifted by 2.62 per cent to $25.46.
Gold prices fell as the US dollar strengthened. Spot gold was down 0.41 per cent to $US1841.96.
Gold miners suffered. Evolution lost 4.84 per cent to $4.72, and Newcrest shed 3.52 per cent to $26.32.
Mesoblast sprung by 14.29 per cent to $2.56 after it claimed progress in treating patients with chronic heart failure.
The company claimed 537 patients injected with its rexlemestrocel-L product during a phase three trial had fewer heart attacks, strokes and deaths.
Mesoblast will ask US authorities for details on having the product approved.
Shaver Shop closed 11.32 per cent higher to $1.18 after it said first-half net profit was expected to rise 85 per cent higher than the same period the previous year.
Net profit was expected to be between $13.5 million to $14 million.
Rio Tinto fared the worst of the big three miners. It lost 1.3 per cent to $122.40.
In banking, ANZ gained 0.04 per cent to $23.85, the Commonwealth slipped 0.55 per cent to $85.16, NAB shed 0.6 per cent to $23.21 and Westpac crept up by 0.05 per cent to $20.29.
On Tuesday, the ANZ-Roy Morgan consumer confidence index is released. The index reached a 10-year high in December.
The Aussie dollar was buying 76.99 US cents at 1717 AEDT, lower from 77.71 US cents at the close of trade on Friday.
ON THE ASX
* The S&P/ASX200 benchmark index closed lower by 60.7 points, or 0.9 per cent, to 6697.2 on Monday.
* The All Ordinaries closed down 64.7 points, or 0.92 per cent, at 6959.5.
* At 1717 AEDT, the SPI200 futures was lower by 12 points, or 0.18 per cent, to 6626 points.
One Australian dollar buys:
* 76.99 US cents, from 77.78 cents on Friday
* 80.20 Japanese yen, from 80.78 yen
* 63.21 Euro cents, from 63.40 cents
* 57.03 British pence, from 57.30 pence
* 107.13 NZ cents, from 107.02 cents.