The benchmark S&P/ASX200 index on Wednesday finished down 152.7 points, or 1.88 per cent, to a nearly three-week low of 7,950.5, while the broader All Ordinaries dropped 165.7 points, or 1.99 per cent, to 8,157.0.
The losses came after an even steeper drop on Wall Street, where the S&P500 fell 2.1 per cent and the Nasdaq retreated 3.3 per cent following the release of the Institute for Supply Manufacturing's report showing a decline in US manufacturing activity for a fifth straight month.
"Make of the ISM survey what you will - the ISM survey does have its critics - but the market is the market and you can't really criticise the collective weight of capital that has reacted to the outcome," Pepperstone head of research Chris Weston said.
It was similar lacklustre data from the same survey a month ago that led to a sharp selloff on the ASX and on markets around the world.
"Once again, the markets are worried about US growth and that's sparking a move away from assets that succumb to recessionary conditions and towards those that offer some safety," Capital.com analyst Kyle Rodda said.
The release of Australian second-quarter gross domestic product figures that were mostly in line with expectations and didn't budge the market much.
The Australian Bureau of Statistics reported Australia's GDP increased by 0.2 per cent in the June quarter, for an annual rate of just one per cent.
"Today's national accounts data show the economy is still on life support, with growth over the past year slipping to its slowest pace since the early 1990s, outside of the pandemic," Deloitte Access Economics partner Stephen Smith said.
Every sector of the ASX finished lower, with all but industrials dropping at least one per cent.
Energy and materials were the worst laggards with a 3.0 per cent drop.
Uranium developer Deep Yellow was the biggest laggard in the ASX200, falling 8.8 per cent to a two-week low of 98c. Fortescue was close behind, retreating 8.5 per cent to nearly two-year low of $16.20 as the iron ore giant traded ex-dividend.
BHP fell 2.5 per cent to $38.64, Rio Tinto retreated 2.3 per cent to $105.68 and South32 subtracted 3.2 per cent to $3.
Goldminers were also in the red as the precious metal traded near a 10-day low of $US2,484, with Evolution dropping 5.5 per cent and Westgold Resources subtracting 6.1 per cent.
All of the big banks similarly lower, with NAB drooping 2.5 per cent to $37.95, CBA subtracting 2.4 per cent to $139.94, ANZ dipping 2.1 per cent to $31.13 and ANZ retreating 1.6 per cent to $30.46.
Insurance companies QBE and IAG did manage to stay in the green, rising 1.2 per cent and 0.7 per cent, respectively, but Suncorp dipped 0.8 per cent and health insurer Medibank Private fell 1.8 per cent.
Orora was another rare gainer, climbing 7.2 per cent to a five-month high of $2.68 after the global packaging manufacturer agreed to sell its North American business to US rival Veritiv Corp for $1.8 billion.
The sale will leave Orora focused on beverage packaging, with the proceeds used to pay down debt and expand its aluminium can capacity at Rocklea, Queensland.
In currency, the Australian dollar had dropped to a two-week low, buying 67.12 US cents, from 67.43 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Wednesday down 152.7 points, or 1.88 per cent, at 7,950.5
* The All Ordinaries dropped 165.7 points, or 1.99 per cent, at 8,157.0
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 67.12 US cents, from 67.43 US cents at Tuesday's ASX close
* 93.39 Japanese yen, from 98.46 Japanese yen
* 60.69 euro cents, from 60.95 euro cents
* 51.17 British pence, from 51.39 pence
* 108.53 NZ cents, from 108.89 NZ cents
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