The Australian share market has suffered its biggest one-day fall in more than two years, wiping around $66 billion from its value.
Tuesday's plunge was double the size of Monday's fall, and comes after Wall Street was hit by a second straight session of heavy selling.
The benchmark S&P/ASX200 index dropped 192.9 points, or 3.2 per cent, to 5,833.3 points in its worst session since September 2015, erasing more than three months of gains.
Other Asian markets also took a hit, with Japan's Nikkei dropping almost five per cent and Hong Kong's Hang Seng Index down more than four per cent in late trade.
CMC Markets chief market analyst Ric Spooner said there are signs that Wall Street's rout - due in part rising bond yields and the prospect of rapid US interest rate hikes - is not over, with Dow Jones futures more than two per cent weaker as the Australian market closed.
"People are concerned by the size of the selloff which has led more people to take defensive action," Mr Spooner said.
However he cautioned about overreaction to the dramatic plunge.
"The size of the movements on the Australian share market over the past two days have been a bloodbath, there's no doubt about that, but at the end of the day it has only taken the market back to where it was in October."
Energy stocks were among the hardest hit, as global oil prices weakened.
Origin Energy tumbled 6.2 per cent, Santos fell 4.4 per cent, Woodside Petroleum shed 3.9 per cent and Oil Search was 3.3 per cent weaker.
An overnight rise in the iron ore price was not enough to protect the big miners, with Rio Tinto and Fortescue each losing more than one per cent, while BHP Billiton suffered a deeper 2.7 per cent fall as activist shareholder Elliot Advisors renewed its push for an end to the company's dual-listed structure.
Westpac was the weakest of the major banks, dropping 3.1 per cent, while Commonwealth Bank, ANZ and National Australia Bank each lost three per cent.
Macquarie Group dropped 5.3 per cent despite forecasting a 10 per cent improvement in its annual profit to a record $2.4 billion.
The release of weaker than expected retail spending figures for December added to the woe for retailers, with JB Hi-Fi dropping 2.4 per cent, Harvey Norman shedding 2.3 per cent and auto and sports goods retailer the Super Retail Group 3.1 per cent weaker.
The Australian dollar is also significantly lower, impacted by the retail data, a deterioration in Australia's trade balance in December, and the Reserve Bank of Australia's decision to leave the cash rate at 1.5 per cent.
The currency was already weaker against the US greenback in overnight trading, and ended local trade more than three quarters of a US cent lower than a day earlier, at 78.57 US cents.
ON THE ASX:
* The benchmark S&P/ASX200 dropped 192.9 points, or 3.2 per cent, to 5,833.3 points.
* The broader All Ordinaries index shed 198.2 points, or 3.23 per cent, to 5,930.2 points
* The SPI200 futures contract was down 178 points, or 2.99 per cent, at 5,783 points.
* National turnover was 5.7 billion securities traded worth $10.9 billion.
CURRENCY SNAPSHOT AT 1700 AEDT:
One Australian dollar buys:
* 78.57 US cents, from 79.39 US cents on Monday
* 85.55 Japanese yen, from 87.26 yen
* 63.49 euro cents, from 63.71 euro cents
* 56.25 British pence, from 56.20 pence
* 107.65 NZ cents, from 108.63 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEDT was $US1,343.40 per fine ounce, from $US1,332.25 per fine ounce on Monday.
BOND SNAPSHOT AT 1630 AEDT:
* CGS 4.50 per cent April 2020, 2.0113pct, from 2.0565pct on Monday
* CGS 4.75pct April 2027, 2.7763pct, from 2.8874pct
Sydney Futures Exchange prices:
* March 2018 10-year bond futures contract at 97.18 (implying a yield of 2.82pct), from 97.065 (implying a yield of 2.935pct) on Monday
* March 2018 3-year bond futures contract at 97.84 (2.16pct), from 97.77 (2.23pct).
(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)
U.S. stocks fell in volatile afternoon trading on Tuesday after shedding gains, following the biggest one-day declines for the S&P 500 and the Dow in more than six years.
Stocks swung up and down after indexes started the session 2 percent lower, underscoring a return of volatility to a market that until recently had been known for the absence of such major shifts. The Dow had a more than 930-point difference between its high and low on Tuesday.
The sharp declines in recent days marked a pullback long-awaited by investors after the market minted record high after record high in a relatively calm ascent.
“When you get these periods of intense panic, it makes sense to be buying while others are forced sellers but on the other hand you don’t know that the negative mood will go away quickly,” said Trevor Greetham, head of multi asset at Royal London Asset Management in London.
The Dow Jones Industrial Average fell 59.07 points, or 0.24 percent, to 24,286.68, the S&P 500 lost 13.09 points, or 0.49 percent, to 2,635.85 and the Nasdaq Composite dropped 2.63 points, or 0.04 percent, to 6,964.90.
Defensive sectors utilities and real estate lagged, while technology and consumer discretionary were among the top-performing sectors.
Source: Netwealth Morning Business Roundup
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Looks like we may be in for some turbulent trading conditions today. It's okay just to watch sometimes.
Happy trading, play nicely and make informed decisions.
