The US markets are tipped to plunge again overnight, setting a bleak tone for Australian trade on Tuesday.
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Banking giants including the Commonwealth, Westpac, National Australia Bank and ANZ along with the big miners Rio Tinto and BHP Billiton all shed about 2% each.
The Dow Jones lost more than 500 points on Friday as China’s economic problems drove a major sell-off on Wall Street.
As well as fielding renewed fears about China’s economy and a possible exit from the eurozone by Greece, investors were unsettled by US oil prices, which on Friday dipped below $US40 for the first time in six years.
Treasurer Joe Hockey said that while markets would go up and down, the fundamentals were still good for the global economy, particularly the US.
Volatility on Chinese share markets, recent moves by China to devalue its currency, plunging oil prices and uncertainty about when US interest rates will be lifted are also combining to spark the global share sell-off.
But he said this would hit confidence in Australia and that’s why the government had to keep reminding people that their economy is one of the fastest-growing in the world right now.
“Billions of dollars of state workers’ money are now being used to prop up the market, but not only is the market falling, China’s economy is also slowing”, our correspondent said.
The losses were worse than expected, with the benchmark ASX200 index finishing the day down an astonishing 4.1 per cent to 5001.3 points, its lowest level in more than two years. As of 0:33 a.m. EDT, the ASX 200 was trading down 3.36 percent at 5050 points, while the All Ordinaries was down 3.25 percent to trade at 5045 points.
Rather than the beginning of a crisis, the market falls are a correction from highs reached earlier in 2015, he said.
“(And) investors are reconsidering the prospect of a Fed rate hike in September, perhaps given concerns about China”, she said.
“Policy makers will be looking to see if we’ve got any pick up in that estimate for non-mining capital expenditure”.
Local losses reflected worldwide market turmoil.
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Al Jazeera’s Adrian Brown, reporting from Beijing, said “you don’t need to be an economist to understand that there are some very odd things happening in the Chinese economy”.
