Warner dived to take a stunning left-handed catch to dismiss opener Michael Carberry for 60 and plunge the tourists to 116 for four at lunch with Ian Bell not out 29.
It crowned an impressive morning for the Australians, coming on top of the wickets of Joe Root and Kevin Pietersen earlier in the session.
Carberry looked the best of the England batsmen showing plenty of resolve and application in his 202-minute stint as wickets fell around him.
Watson showed his worth as an allrounder with three maiden overs and Carberry's wicket.
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Ian Bell, who crashed two sixes off spinner Nathan Lyon, looked England's remaining big batting hope.
England lost the wickets of Root and Pietersen in the opening hour of play.
The tourists, already one down in the series and resuming at 35 for one, succumbed to Australian pressure.
Root showed plenty of application in the opening half-hour before he lashed out on the first ball he faced from spinner Lyon.