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.
How far will markets drop?
Analysts are still questioning how far global share markets may drop, or indeed if they will continue to fall, after two days of heavy losses on Wall Street sparked plunges across global markets.
The question for equity markets now is how deep the hole will turn out to be.
Brokers on the floor of the New York Stock Exchange. Source: AAP
Patersons economic strategist Tony Farnham said investors in the US were grappling with several issues, including the returns they could get from relatively risk-free Treasury bonds, the yields of which are rising, compared to those they can get from riskier assets such as stocks.
Wall Street also has been affected by stock-specific stories, such as US bank Wells Fargo tumbling 10 per cent after being stopped from growing its asset book until it gets various compliance issues in order, he said.
Some recent profit results from the likes of tech giants Google and Apple have also failed to inspire investors.
Furthermore, there is continued debate over whether the US Federal Reserve is going to increase interest rates more than three times this year, as strengthening jobs and wages data point to a risk of increased inflation.
"These sorts of things tend to roil markets if they're more aggressive than what people are expecting," Mr Farnham said.
"That's washed across to us."
Mr Farnham said that although Wall Street had pulled back in recent sessions, the US economy was still strengthening and the Trump administration's recent tax cuts should provide a further boost.
"It's not the (US) economy pushing the stock market down - it's the expectations of what (the US Federal Reserve) does, which is a key factor at play," Mr Farnham said.
He reminds investors that the nature of share markets is to go up and down, and suggests that investors holding quality stocks try to ride out the volatility.
"I honestly don't know where it will go in terms of a fall," Mr Farnham said.
Traders work on the floor of the New York Stock Exchange (NYSE). Source: Getty
"But, from an Australian context, the major banks, major resources and major retailers - the big end of town - will be there at the end of all this, barring some absolutely catastrophic stock-specific story."
Mr Farnham said investors' attention will likely turn toward the local company reporting season on Wednesday when market heavyweight Commonwealth Bank announces its half-year results.
Earlier today, Charles Schwab market analyst Ben Le Brun said there was not even one stock on the Australian share market that opened stronger in the early stages of trading, following Wall Street's slump.
"It is an actual bloodbath," Mr Le Brun said.
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