Australian shares tumbled on Thursday after an inversion in the U.S. bond yield curve flashed warning signals to investors that the global economy faces severe risks.
For the first time since 2007, the yield on the U.S. Treasury 10-year note temporarily fell below the two-year yield, an inversion of normal interest rate patterns that is widely seen as an indicator of a looming recession.
The S&P/ASX 200 index suffered broad losses with only 12 of the index's 200 stocks showing gains at one point.
It had fallen 2.1%, or 135.9 points, to 6,459.9 by 0200 GMT. On Wednesday, the benchmark rose after U.S. President Donald Trump delayed tariffs on some Chinese imports, which eased concerns about the U.S.-Sino trade war.
Talking about the risk to Australia, Damian Rooney, a director of equity sales at Argonaut, said "we're in a pretty tough position," with interest rates at record lows.
"The last time when we had a global financial crisis, Australia had very high interest rates and could cut and we were one of the few countries that avoided a recession. This time they are significantly lower."
All three major U.S. indexes slumped on Wednesday, including the blue-chip Dow Jones industrial average, which posted its biggest one-day points drop since October last year.
Australia's Big Four banks - Commonwealth Bank of Australia , Westpac Banking Corp, National Australia Bank and Australia and New Zealand Banking Group - slumped between 1.9% and 2.6%.
Australian miners, already highly dependent on economic growth in China, also fell as worries of recession raised fresh demand fears.
BHP Group and Rio Tinto fell 2.2% and 2.3%, while most other major miners like Fortescue Metals Group and South32 were also lower.
A steep fall in oil prices weighed on oil-and-gas stocks, with Woodside Petroleum down 5.4%. The company earlier posted a smaller half-year profit than a year earlier and lowered its interim dividend.
Local gold stocks benefitted from investors' move to the perceived safety of the metal.
Treasury Wine Estates, one of the few non-gold stocks on the rise, was boosted by a more than 16% rise in annual profit following higher demand in Asia for its premium names. The stock rose as much as 4.3% for its biggest intraday gain since January.
New Zealand's benchmark S&P/NZX 50 index slipped 1.4%, or 151.81 points, to 10,697.95.
Vista Group, which supplies software to the global movie industry, led the losses, down 3.6% while a2 Milk fell 2.3%. - Reuters