The volatility characterising trade in July has deepened, with investors sending the Australian stock market tumbling almost 1.9% on growth concerns and a pullback in buying from overseas, a day after it rebounded to post its biggest one-day gain since October 2011.
Markets across Asia took a hit with investors rattled by fresh concerns about the eurozone, the political crisis in Egypt and a disappointing read for Chines non-manufacturing PMI.
At the 1615 AEST official market close, the benchmark S&P/ASX200 index fell 1.86% to 4,744.1 points, while the broader All Ordinaries index lost 1.72% to 4,727.8 points.
The benchmark earlier touched an intra-day low of 4720.2 points.
CMC Markets senior trader Tim Waterer said a retreat by international investors was adding to the local market's woes.
"With further RBA rate cuts in the pipeline and a weakening Australian dollar, Australian equities are not quite the ‘mecca’ for yield as they once were for international investors," he said.
"With decreased levels of demand from off shore, our market may be facing more of a grind than usual in the short term."
Investors unwound equity positions on growth concerns on the domestic and global fronts.
"Our market has again taken the offshore lead and then exaggerated the move, as has been the trend of the ASX200 this week," Mr Waterer said.
"It appears our market is over-cooking the moves both higher and lower which is only serving to increase volatility."
Materials led the market lower, with the major miners reversing yesterday's gains.
Rio Tinto shed 2.96% to $51.50, while BHP Billiton lost 3.18% to $31.05.
Fortescue Metals slipped 0.96% to $3.09.
Whitehaven Coal dropped 5.49% to $2.24, while Newcrest added 1.59% to $10.85.
The energy sector was higher across the board.
Santos declined 0.16% to $12.85, Oil Search dipped 1.77% to $7.76 and Woodside decreased 3.35% to $34.62.
Financial stocks were weaker, with the big four banks in the red.
Commonwealth Bank fell 0.54% $68.53, while ANZ Banking Group lost 2.14% to $27.87.
National Australia Bank declined 1.85% to $28.72, while Westpac Banking Corporation gave up 2.64% to $27.67.
Investment bank Macquarie Group retracted 3.02% to $40.40.
In the insurance sector, QBE dropped 1.25% to $15.74, Insurance Australia Group decreased 2.33% to $5.46 and Suncorp reversed 1.76% to $11.72.