Around $35 billion was wiped off the share market today as it posted its biggest one-day loss in more than nine months for both major indices to finish below 5,000 points.
Major markets around the region have slipped between 1 and 2 per cent on Chinese moves to curb property speculation and US Federal Reserve minutes that showed some members are advocating for more flexibility in, and perhaps a reduction of, the bank's stimulus program.
Around 4:30pm (AEDT), Tokyo's benchmark Nikkei share index was down 1.3 per cent and Hong Kong's Hang Seng was off 1.8 per cent.
Locally, the All Ordinaries index slid 2.3 per cent to 4,999 at the close, while the ASX 200 dropped 119 points to 4,980.
That was comfortably the biggest one-day loss for the benchmark Australian share index since May 18 last year when the ASX 200 lost 2.7 per cent.
The main drag was the resources sector, with BHP Billiton down another 3.8 per cent after Rio Tinto was also down steeply, falling 3 per cent to $67.30, while Fortescue was down 2.4 per cent.
Woodside gave up gains it made after , falling 2.9 per cent today to $37.95, while fellow oil and gas producer Santos was off 6.2 per cent to $11.90.
Stockbroker Marcus Padley, author of the Marcus Today newsletter, told PM the commodities sector had possibly been hit by rumours of a US hedge fund ditching assets because it was in trouble.
"One of the stories going around is that there's a commodities hedge fund in the US that has gone belly-up or something like that and is having to liquidate positions in all sorts of commodity-orientated investments, which include, apparently, Australian equities," he said.
Cashing in However, the mining sector was not the only significant segment of the market to post large falls.
The major banks were also recording steep losses, with NAB down 3.4 per cent, ANZ down 2.9 per cent, the Commonwealth Bank down 2.8 per cent and Westpac also 2.8 per cent lower at $29.49.
Mr Padley says that may be a sign that a major investment bank decided to cash in some of the substantial share gains that have been made over the past few months.
"It would only take one international fund to make some small asset allocation change that would include $1 billion being sold in the Australian market, something like that, which would create this sort of day," he said.
Some companies were also hit by weak profit reports; was down 8.5 per cent to $11.33 and was down 2.8 per cent to 53 cents.
The companies performing best were those outside the cyclical sectors and not as exposed to the global economy, but even they generally got sold down.
Wesfarmers was off 0.6 per cent to $39.40 and blood products maker CSL was off just 0.5 per cent.
Retailers also held up relatively well; Myer was down 0.4 per cent, David Jones finished flat at $2.68 and JB Hi-Fi was up 0.4 per cent to $12.40.
Some companies also defied the downward trend through better-than-expected earnings reports; closed up 2.8 per cent to $1.66 and rose 2.8 per cent to $5.57.
The Australian dollar also dropped sharply, falling more than a cent from around 103.6 US cents yesterday afternoon to 102.35 US cents by 4:38pm (AEDT) today.