US stocks plummet to pre-GFC levels - should we be worried?

US stocks have plunged in what is the worst decline since 2011, with the Dow closing down 1,175 points or 4.6% and the S&P closing with a 113 point drop, or 4.1%.

Also read: AU shares lose $33bn in US-led retreat

So what does this mean for the Aussie economy?

Australian shares have lost around $33 billion after a sharp fall in US markets last Friday sent local investors running for the exits on Monday.

The benchmark S&P/ASX200 stock index ended the day down 95.2 points, or 1.56 per cent, at 6,026.2 points, with all sectors deep into the red except for defensive utility stocks.

Also read: US stock market plummets

The Australian share market has not had a major correction for some time so the question is whether this is the start of something significant.

However, Australian shares look set to open sharply lower today at 10am.

At 0700 AEDT on Tuesday, the share price futures index was down 88 points, or 1.48 per cent, at 5,873.

But Turnbull government ministers remain upbeat about the Australian economic outlook in the face of a massive sell-off of shares in the US.

Treasurer Scott Morrison believes the big dive on the US stock market is a recalibration associated with recent economic data.

He told reporters in Canberra the market was reacting to last week’s US wage data and more bullish sentiment about what’s happening with inflation and its impact on bond markets.

“Markets are volatile – when they recalibrate in relation to events like this you do see a bit of these events happening,” he said.

“But people who watch these markets more and participate in them more closely than I do, I think, will see this for what it is and understand the forces behind it.”

Share market volatility aside, Trade Minister Steven Ciobo says the Australian economy is behaving “exceptionally strongly”.

“We are seeking really strong economic growth in Australia, we are seeing great employment creation.”