Meanwhile, selloff pressure intensified after several Federal Reserve and European Central Bank officials reiterated their support for further interest-rate hikes to combat inflation.
At closing bell, the benchmark S&P/ASX200 index dropped by 141.16 points, or 2.02%, to 6,845.60. The broader All Ordinaries index declined 146.22 points, or 2.02%, to 7,079.92.
Materials stocks declined. BHP Group dropped after trading ex-dividend, while Rio Tinto fell about 2% in line with the broader market, despite the miner said it would buy the remainder of Canada's Turquoise Hill for $3.3 billion that would give the miner access to the massive Oyu Tolgoi project in Mongolia.
Gold stocks declined, as sentiment for the precious metal was dampened following a robust U.S. dollar. Northern Star Resources and Newcrest Mining fell 5.1% and 3.7%, respectively. Financials slipped 1.3%, with the "Big Four" banks dropping between 0.8% and 1.5%
ECONOMIC NEWS: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) dropped 3.2 points to 49.3 in August, indicating a slight contraction (readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction). This is the first time the index has contracted since January 2022 following the Omicron outbreak.
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