Stocks on Wall Street have dropped sharply as investors worry about the latest crisis engulfing US President Donald Trump.

Markets at 8:30am (AEST): ASX SPI 200 -1.07pc at 5,720

ASX SPI 200 -1.07pc at 5,720 AUD: 74.3 US cents, 57.3 British pence, 82.4 Japanese yen, 66.6 euro cents, $NZ1.07

AUD: 74.3 US cents, 57.3 British pence, 82.4 Japanese yen, 66.6 euro cents, $NZ1.07 US: S&P 500 -1.8pc at 2,357, Dow Jones -1.78pc at 20,607, Nasdaq -2.57pc at 6,011

US: S&P 500 -1.8pc at 2,357, Dow Jones -1.78pc at 20,607, Nasdaq -2.57pc at 6,011 Europe: Euro Stoxx -0.1 pc at 391, FTSE -0.2pc at 7,503, DAX -0.4 at 12,632

Europe: Euro Stoxx -0.1 pc at 391, FTSE -0.2pc at 7,503, DAX -0.4 at 12,632 Commodities: Gold +2.0pc to $US1,261/ounce, Brent crude oil +0.7pc at $US51.99, iron ore +1.7pc at $US62.20

That is after reports of a memo by former FBI director James Comey suggested that Mr Trump tried to interfere with an FBI investigation.

Investors are worried that Mr Trump will not be able to get his business-friendly economic policies through Congress, such as the tax cut and deregulation promises that have driven Wall Street to record highs.

US stocks reached record levels after the election of Donald Trump as US President last November.

One senior market strategist told Reuters the fears the market had in October about uncertainty around Mr Trump appear to be coming to fruition.

Bank stocks slumped as bond yields declined.

The S&P 500 fell nearly 2 per cent, its biggest one day fall since last September.

The Dow Jones Industrial Average lost 1.8 per cent and the Nasdaq lost 2.6 per cent.

Stocks in small firms lost more ground than big companies.

The Russell 2000 index fell nearly 3 per cent.

European markets were also in the red.

Investors have turned to gold as a safe haven with spot gold surging on a lower greenback.

Volatility returns to markets

While most traders are not yet betting on a Donald Trump impeachment, ANZ's analysts said they view the distraction from economic policy as very damaging to market prospects.

"Uncertainty over the Trump administration's ability to stay focused and effectively carry out its planned economic program rose sharply overnight, and this was reflected in a flight to safe-haven assets," they wrote.

NAB's David de Garis said the latest Trump scandals have come straight after some surprisingly weak US economic data out late last week.

"This all comes on the heels of the sharp dive in the US Economic Surprise Index, last week's further softness in US inflation, now politics intervening to add more noise into a market already wondering whether the US economy is slowing or not," he said.

The market volatility index, the VIX, jumped to its highest close in more than a month.

IG's Chris Weston said the biggest concern for the markets is that a period of relative calm has been shattered.

"The moves in financial markets have been brutal, not because of the absolute size of the move, but specifically because of the size of the move after a prolonged period of such subdued implied volatility," he wrote in a note.

"On a relative basis, this has jumped out at traders and given them a wake-up call that markets do indeed have a pulse."

The Australian market reached losses around 1.5 per cent in early trade before the decline was stemmed by the release of some robust employment numbers.

Billionaires caught out by market rout

Bloomberg News reported the world's richest people lost $US35 billion because of the political turmoil in the US.

The Bloomberg Billionaires Index showed that Microsoft founder Bill Gates, who is worth $US86.8 billion as the world's richest person, lost $US1 billion as shares in Microsoft Corporation plunged 2.8 per cent, the biggest fall in nearly a year.

Amazon.com co-founder Jeff Bezos has dropped to the third richest person in the world after shares in the online retailer plunged 2.2 per cent. Mr Bezos lost $US1.7 billion.

Spanish retail mogul Amancio Ortego lost $US355 million but now has the consolation of being the second richest person in the world with a net worth of $US83.2 billion. Mr Ortego owns the parent company of the popular Zara retail chain.

Facebook founder Mark Zuckerberg was hardest hit by the share market rout, losing $US2 billion from his net worth when shares in the social media company dropped 3.3 per cent.

Mr Zuckerberg is the fifth richest person in the world with a net worth of $US62.3 billion, according to the Bloomberg Billionaires index, which ranks the world's 500 richest people.

Bloomberg notes that Mr Trump has a net worth of $US3 billion and is not in the Bloomberg index.