The Australian sharemarket closed more than four per cent weaker, with losses in all sectors particularly among the major miners and energy stocks after Wall Street's lowest close since 2003.
The benchmark S&P/ASX200 index was down 146.7 points, or 4.19 per cent, at 3,352.9 while the broader All Ordinaries index had shed 150.6 points, or 4.32 per cent, to 3332.6.
On the Sydney Futures Exchange at 1615 AEDT, the December share price index futures contract was down 134 points at 3,390 points on volume of 39,060 contracts.
Bell Potter senior adviser Stuart Smith said the majority of trade today consisted of forced sales.
"What I can see is that the distressed selling is continuing and at a greater rate than it has in the last three or four weeks," Mr Smith said.
"The market has absorbed $4.2 billion of turnover today and most of that is distressed selling."
The mining giants were among the day's worst performers.
BHP Billiton fell $2.10, or 9.05 per cent, to $21.10 while its takeover target Rio Tinto gave up $8.65, or 13.13 per cent, to $57.25.
"It's forced selling. There can be no other reason," Mr Smith said.
"The market's trying to find an absolute floor. It will happen just as night follows day, but when is the story. It's just a matter now of having patience. This is the greatest test of patience I've experienced in 30 years."
Among the banks, ANZ fell 82 cents, or 5.93 per cent, to $13.00, Commonwealth Bank dropped $1.62, or 5.24 per cent, to $29.31 and National Australia Bank lost 86 cents, or 4.37 per cent, to $18.82.
Westpac shed 65 cents, or four per cent, to $15.60 after unveiling its senior executive line-up after merging with St George Bank.
Macquarie Group bucked the trend, gaining $1.84, or 7.31 per cent, to $27.00.
In the energy stocks, Woodside Petroleum fell $3.28, or 9.67 per cent, to $30.65, Santos dropped 42 cents, or 3.28 per cent, to $12.40 and Oil Search was flat at $4.65.
At 1635 AEDT, spot gold in Sydney was trading at $US737.60 an ounce, down 75 US cents on yesterday's local close of $US738.35.
Newcrest was steady at $18.95, Newmont lost 13 cents $3.47 and Lihir Gold fell 6.5 cents to $1.625.
Making news, wealth manager Challenger Financial Services Ltd said it was well placed to grow once investors regained the confidence that had been dashed by the financial crisis.
Challenger fell nine cents, or 5.45 per cent, to $1.56.
Trans-Tasman food company Goodman Fielder Ltd said its first half profit would be below the same period last year but a stronger second half is expected because of lower costs.
Goodman dropped six cents, or 3.92 per cent, to $1.47.
Wood chipper Gunns Ltd reiterated its guidance for fiscal 2009 as it told the Australian securities exchange it was unable to explain its falling stock price.
Gunns lost eight cents, or 9.25 per cent, to 78.5 cents, following a fall of nearly 18 per cent on Wednesday.
Several retailers suffered heavy losses.
Coles owner Wesfarmers lost $1.72, or 9.19 per cent, to $17.00, David Jones shed 18 cents, or 6.79 per cent, to $2.47, Woolworths fell 47 cents to $24.63 and Harvey Norman cast off four cents to $2.14.
The most traded stock on volume was Oz Minerals, with 84.4 million units changing hands worth a total of $46.2 million.
Oz Minerals shares were down 10.5 cents, or 16.67 per cent, to 52.5 cents.
Preliminary market turnover was 1.66 billion shares, valued at $4.96 billion, with 206 stocks up, 872 down and 305 unchanged.
