The Australian share market has suffered its biggest one-day fall since September, shedding around $42 billion in value.

Key points: ASX 200 closed 2.9 per cent lower at 4,832

ASX 200 closed 2.9 per cent lower at 4,832 Market value fell by $42.5 billion

Market value fell by $42.5 billion Banks led the slide - big four off between 4-5.2 per cent

Banks led the slide - big four off between 4-5.2 per cent Australian dollar holds at 70.4 US cents

The main ASX 200 index closed 2.9 per cent lower at 4,832, while the broader All Ordinaries index was 139 points down at 4,883.

With the All Ordinaries index shedding 8.6 per cent so far this year, the value of Australia's listed companies has gone down by around $140 billion in 2016.

Banks were the biggest losers on the market, with the financial sector index down 4.1 per cent today.

IG chief market strategist Chris Weston said the commodity crunch was spreading to the financial sector that had lent resources companies money for their projects.

"The long-felt pain in the energy sector has now fully morphed into a banking crisis," he wrote in a note.

"This period of sustained volatility and deterioration in credit will impact businesses and one has to be concerned about how many households are feeling this drawdown in the financial markets."

The largest fall in the sector was for one of the smaller players, Bank of Queensland, which dropped 8.1 per cent to $11.66 on a warning that market volatility was increasing its funding costs and putting pressure on profit margins.

However, the big four also got walloped, with Westpac slumping 5.2 per cent, NAB 4.8 per cent, the Commonwealth Bank 4.6 per cent and ANZ 4 per cent.

Investment bank Macquarie was also down 4 per cent, amid a global rout for banking stocks.

Deutsche Bank shares closed around 8 per cent lower in Germany overnight, and CommSec market analyst Tom Piotrowski said that sell-off spread to other banks around Europe and in the US.

"Similarly on Wall Street, we saw pretty steep declines for leading financial names. Goldman Sachs shares had their biggest fall in six years," he told ABC News 24.

"There is something of a unifying theme throughout the markets around the world. That is why the domestic banks are under such pressure."

The major miners were no support to the broader market, with BHP Billiton sliding 2 per cent, Rio Tinto down 1.25 per cent, Fortescue off 1.6 per cent and South32 losing 4.2 per cent.

Energy stocks also bled value after West Texas crude oil dropped back below $US30 a barrel overnight.

Woodside fell 2.5 per cent, with Santos down twice that much to $3.06, Origin was off 3.8 per cent and Oil Search closed 2.3 per cent lower at $6.74.

However, the market's biggest winners also came from the resources sector — gold miners and explorers — as investors sought out traditional safe havens.

The price of the precious metal bounced to $US1,192 an ounce, pushing Newcrest 8.25 per cent higher to $16.80, Regis Resources was 12.3 per cent up, Northern Star 7.7 per cent ahead and Evolution rose 6.4 per cent.

BetaShares chief economist David Bassanese said there were now a range of fears that were causing people to sell.

"First we were worried about emerging markets, now we're worrying about European banks, we're worrying about the United States, so there's a lot of factors at play," he told ABC News.

The Australian dollar also managed to survive the equities carnage largely unscathed, holding at 70.4 US cents by 4:40pm (AEDT).

However, it was down against most other major currencies at 62.8 euro cents, 80.75 Japanese yen, 48.8 British pence and $NZ1.067.

Many major Asian markets were closed for the Lunar New Year holiday, but Tokyo's Nikkei slumped 5.4 per cent.

US share futures were pointing to another evening in the red, with the Dow Jones Industrial Average futures off 126 points to 15,862 by 5:44pm (AEDT).