The Australian share market slumped to a two-year low, weighed down by the major banks as hopes for a trade resolution between the US and China continue to fade.

The benchmark S&P/ASX200 index was down 129 points, or 2.27 per cent, at 5552.5 at 1615 AEDT on Monday, while the broader All Ordinaries fell 2.26 per cent.

The Aussie dollar recovered ground after it had threatened to hit a six-week low against the US dollar, but was still just 72.14 US cents compared to 72.29 on Friday.