[SYDNEY] Australian shares slumped on Monday, dragged down by financials and materials, as investors were rattled by talk that Federal Reserve might hike US interest rates next week.
Boston Fed President Eric Rosengren said on Friday that gradual interest rate increases might be in order with the US economy at full employment and that low interest rates were increasing the chance of an overheated economy. "Eric Rosengren is a noted dove and when he came out and spoke about raising interest rates, he set the tone for the US markets... the Asian markets followed suit," said Tony Farnham, an economist with Patersons Securities.
The S&P/ASX 200 index fell 120.58 points, or 2.3 per cent, to 5,218.6 by 0241 GMT, its lowest since July.
The Bank of Japan is considering ways to steepen the Japanese yield curve, according to sources, while media reports speculating that central banks are running short of fresh stimulus measures slackened risk appetite globally.
Locally, Reserve Bank of Australia Assistant Governor Chris Kent is due to give a speech on Tuesday and there will be jobs data on Thursday.
Oil prices in Asia extended Friday's 4 per cent fall after rig count showed increasing oil drilling activity in the United States, indicating that producers can operate profitably around current levels.
Basic materials and energy stocks slid on the back of a strong dollar.
Mining giants BHP Billiton Ltd and Rio Tinto Ltd shed 3.5 per cent and 2.1 per cent respectively. Fortescue Metals was down 3.3 per cent.
Gold stocks were among the biggest losers in the sector after spot gold slipped 0.2 per cent by 0228 GMT. Newcrest Mining was 4.2 per cent lower and Northern Star Resources down 4 per cent.
Energy stocks fell to their lowest in over two months as oil prices tumbled. Woodside Petroleum and Oil Search lost more than 3 per cent. Santos Ltd fell 5 per cent to its lowest in five months.
The "Big Four" banks declined between 1.4 per cent to 2.3 per cent.
New Zealand's benchmark S&P/NZX 50 index, which lost nearly 1 per cent on Friday, fell 2.6 per cent, or 195.07 points to its lowest in over a month at 7,273.53.
Financials, utilities and industrials dragged the index down.
Air New Zealand Ltd was among the big losers on the benchmark, down 4.4 per cent, while accounting software developer Xero Ltd lost the most at 4.5 per cent lower.