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Aust shares down sharply after US inflation readout

The local share market has suffered its worst day of losses in almost eight weeks following signs inflation in the US is proving remarkably sticky.

The S&P/ASX200 index finished Monday down 82.2 points, or 1.12 per cent, to 7,224.8, while the broader All Ordinaries dropped 93.1 points, or 1.24 per cent, to 7,419.6.

It was the ASX's second-worst performance of the year, behind a 92.5 point, 1.31 per cent decline on January 3.

"What a tough old day," said IG market analyst Tony Sycamore, who blamed the sell-off on a Friday night readout of the Federal Reserve's preferred inflation metric "stunning to the upside".

The personal consumption expenditure (PCE) readout showed US consumer spending rose 4.7 per cent in the year to January. The market had been expecting 4.3 per cent with "probably with some room for a 4.4 per cent", Mr Sycamore told AAP.

"But there was no breathing room at all for a 4.7 per cent - and it adds to the latest round of hotter-than-expected economic data, which suggests that the US economy is a lot more resilient than we're hoping for."

Markets are now pricing in the possibility that the Fed will return to a supersized 50 basis point rate hike at its March 23 meeting, after raising rates by half that amount on February 1.

Closer to home is fallout from the Australian earnings season, Mr Sycamore said.

"It has been one of the more disappointing earnings seasons we've had, with more results skewed towards misses rather than beats.

"And the forward guidance from companies, particularly those consumer facing companies and banks, have all indicated that we are facing challenging times ahead."

Still, Mr Sycamore said he was happy to get back into the market at these levels after having cashed out following January's rally.

Every ASX sector was lower on Monday except energy and utilities, both of which were up by around one-quarter of a percentage point.

Mining was the biggest loser, dropping 3.2 per cent after a 3.0 per cent decline in total last week.

"That's really fallen out of favour - the material sector had a fantastic start to the year and it's given it all back," Mr Sycamore said.

Fortescue Metals, which hit an 18-month high of $23.30 last Tuesday, fell 7.3 per cent to a month-and-a-half low of $20.81.

Downer EDI plunged 23.7 per cent to a nearly three-year low of $3.02 after the infrastructure services company slashed guidance by $40m, saying it now expects to make between $170m and $190m in full-year profit.

Downer blamed a number of issues, including an accounting blunder that caused it to overstate several years of earnings and the impact of recent floods and storms on New Zealand's North Island.

BHP subtracted three per cent to $44.50, Rio Tinto dropped 2.9 per cent to $115.46 and Mineral Resources retreated 6.4 per cent to $79.50.

Pilbara dropped 7.3 per cent to $4.20 despite securing a $US460m debt facility, while Lynas fell 6.3 per cent to $7.97 even as the rare earth miner announced it had made $150.1m in profit for the half year.

In the energy sector, Woodside had a better day, rising 1.5 per cent to $35.13 after the Perth-based oil and gas giant tripled its full-year profit and increased its return to shareholders on the back of soaring energy demand.

Qantas had a late rally, rising two per cent to $6.28 after the national carrier announced several new senior executive appointments.

TPG climbed 5.9 per cent to $5 after the telco announced its full-year earnings had grown 3.8 per cent to $1.8 billion.

The big banks all finished up slightly with ANZ the biggest gainer, climbing 0.5 per cent to $29.99.

In currency, the Australian dollar was at its lowest level against the greenback since shortly before Christmas.

The Aussie was buying 67.05 US cents, from 68.14 US cents at Friday's ASX close.

Looking forward, Mr Sycamore said the market would be watching Tuesday's release of Australian retail sales figures for January, after December's figures came in softer than expected.


* The benchmark S&P/ASX200 index finished Monday down 82.2 points, or 1.12 per cent, at 7,224.8.

* The broader All Ordinaries dropped 93.1 points, or 1.24 per cent, to 7,419.6.


One Australian dollar buys:

* 68.14 US cents, from 68.14 US cents at Friday's ASX close

* 91.37 Japanese yen, from 91.68 Japanese yen

* 63.62 Euro cents, from 64.27 Euro cents

* 56.17 British pence, from 56.66 pence

* 109.25 NZ cents, from 109.24 NZ cents.