The Australian share market has suffered its worst loss in three months after the chairman of the US central bank said interest rates needed to rise further to combat inflation.
The benchmark S&P/ASX200 index on Thursday gave back more than half of its gains from a seven-day winning streak that snapped Wednesday, plunging 119.4 points, or 1.63 per cent, to 7,195.5.
The broader All Ordinaries dropped 124.6 points, or 1.66 per cent, to 7,381.
It was the worst day for the ASX since a 2.28 per cent sell-off on March 10 that followed the collapse of Silicon Valley Bank in the United States.
State Street Global Advisors SPDR ETF Equity Strategist Julia Lee said the latest plunge was prompted by a focus on interest rates and inflation.
Overnight Federal Reserve chairman Jerome Powell told the US lawmakers that the central bank had more work to do raising rates, saying the fight against inflation "has a long way to go."
A forecast of two more 25 basis point rate hikes by the end of the year is "a pretty good guess of what will happen if the economy performs about as expected," Powell said.
The Fed chair also told the House Financial Services Committee that cryptocurrencies like Bitcoin had "staying power," which sent the digital asset surging to a two-month high.
Also overnight, inflation in the United Kingdom remained much higher than expected for a fourth month in a row, coming in at 8.7 per cent in May, which Ms Lee said further weighed on sentiment.
"The hot UK inflation print for May has markets asking whether a return to 50 (basis point) rate hikes is required this week," Ms Lee said told AAP in an email.
"With interest rates in focus, perhaps the three meetings tomorrow could prove more meaningful for markets," she added.
"Possibilities are building for each of the Norges Bank, Swiss National Bank and Bank of England to be more aggressive than the 25bps each are expected to hike."
All 11 sectors of the ASX finished in the red on Thursday, with the interest-rate-sensitive technology, property and telecommunications services sectors faring the worst.
Tech fell 3.9 per cent, property 2.4 per cent and telecom, 2.2 per cent.
All of the Big Four banks were down sharply, with CBA and ANZ both down 1.6 per cent, to $100.08 and $23.30, respectively, while NAB fell 1.4 per cent to $26.15 and Westpac retreating 0.9 per cent to $21.04.
The heavyweight mining sector fell 1.9 per cent, with BHP down 2.4 per cent to $45.12, Fortescue dropping 2.2 per cent to $21.53 and Rio Tinto finishing 1.2 per cent lower at $114.39.
John Lyng Group was the worst performer in the ASX200, plunging 11.9 per cent to a two-year low of $5.24 after the building services company forecast widening losses in its commercial construction division.
"The reduction is consistent with the headwinds facing this sector in Australia and vindicates the Group’s previously announced strategy to exit this business line," the company said.
Goldminers were under pressure as the prospect of higher rates drove gold prices to a three-month low of $US1,930.
Northern Star dropped 3.2 per cent to a three-week low of $12.62 as the goldminer made a final decision to invest $1.5 billion to expand and modernise its flagship mill in Kalgoorlie, WA, which processes ore from its famed Super Pit goldmine.
Gold Road Resources dropped 8.31 per cent to $1.60 after downgrading its full-year gold production guidance.
Telix Pharmaceuticals was one of just a few companies in the green, climbing 1.8 per cent to an all-time high of $12.50 after agreeing to acquire UK-based medical device company Lightpoint Medical.
The Australian dollar was buying 67.64 US cents, down from 67.76 US cents at Wednesday's ASX close and from over 68 US cents earlier in the week.
Bitcoin was up four per cent, trading for over $US30,000 ($A44,480) for the first time since April, while Ethereum was over $US1,900 ($A2,800) for the first time since May.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Thursday down 42.9 points, or 0.58 per cent, at 7,314.9
* The broader All Ordinaries fell 42.9 points, or 0.57 per cent, to 7,505.6
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 67.64 US cents, from 67.76 US cents at Wednesday's ASX close
* 95.92 Japanese yen, from 96.23 Japanese yen
* 61.56 Euro cents, from 62.05 Euro cents
* 53.02 British pence, from 53.03 British pence
* 109.25 NZ cents, from 109.73 NZ cents
