The Australian share market lost $60 billion in value, completing the wipeout of all the gains it made over the past two months.

Key points: The benchmark ASX 200 index closed 2.9 per cent lower at 6,408

The benchmark ASX 200 index closed 2.9 per cent lower at 6,408 Market sell-off was triggered by "inverted" bond yields

Market sell-off was triggered by "inverted" bond yields America's short-term (two-year) bonds are paying higher interest rates than long-term (10-year) bonds

The benchmark ASX 200 index closed 2.9 per cent lower at 6,408 on Thursday, a stunning retreat from its record high reached on July 30.

It was the worst one-day fall for the benchmark index since February 2018, narrowly eclipsing a 2.83 per cent decline last October.

The broader All Ordinaries index dropped by 2.8 per cent to 6,491, with companies on that index collectively shedding about $60 billion in market value.

It came after Wall Street suffered its worst one-day fall of 2019 on heightened fears of a United States recession, triggering a sell-off across global markets.

The likelihood of the US falling into recession next year is "growing", with bond markets pricing in a 38 per cent chance, Fidelity International's cross asset investment specialist Anthony Doyle said.

"While we don't expect an imminent recession, the case for further rate cuts in the US is getting stronger," he said.

He also said the US Federal Reserve would have little choice but to "ease rates, thus keeping US Government bonds from rising materially".

Best and worst performers

Every sector posted heavy losses, with energy (-5.2pc), technology (-4.6pc) and industrials (-3.5pc) the worst performers.

The stocks experiencing the steepest falls included funeral company InvoCare (-7.9pc), Blackmores (-14.9pc) and information technology firm Appen (-7.8pc).

Blackmores shares slumped to a four-year low of $70.90. This was after the vitamins and supplements maker slashed its final dividend by 55 per cent, as its full-year profit dropped 23.6 per cent to $53.4 million. It is highly exposed to the Chinese market.

Gold miners were the best-performing stocks after a surge in the precious metal's spot price.

Shares in Evolution Mining, St Barbara and Northern Star Resources jumped between 1.6-1.8 per cent.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 32 seconds 32 s Wall Street suffers worst day of the year on recession fears

"Precious metals and gold miners will continue to outperform as investors seek out safe havens to protect against volatility," Saxo Capital Markets strategist Eleanor Creagh said.

"Heightened geopolitical risks and trade tensions set to weigh on global growth combined with an aggressive easing cycle from the US Fed, with a further rate cut set for September, spurring demand for gold and dividend paying gold miners as a store of value."

The Australian dollar lifted to 67.8 US cents, a moderate gain of 0.5 per cent.

The local currency was boosted by stronger-than-expected job figures — which revealed 41,100 new jobs were created in July, with the unemployment rate steady at 5.2 per cent.

US recession fears



The local market fell sharply after the Dow Jones index plunged 800 points in one trading session.

The other major US indices, the S&P 500 and Nasdaq, also dropped by about 3 per cent each, while European markets were caught in the sell-off as well.

The cause of the market panic was a bond market phenomenon known as the "inverted yield" — when interest rates on America's long-term (10-year) government bonds fall below short-term (two-year) rates.

It has been regarded by traders as a reliable predictor of US recessions in the past few decades.

Furthermore, this "inversion" in bond markets has not occurred since 2007, just before the global financial crisis.

Worse-than-expected economic figures from China also contributed to the market panic — and fears of a global economic slowdown.

China experienced its weakest factory output in 17 years, with its latest official figures showing that industrial production grew by an annualised 4.8 per cent in July — down from 6.3 per cent in the previous month.