The local share market dropped to its lowest level in three weeks after a hotter-than-expected US inflation readout pushed back expectations about how quickly central banks will cut interest rates this year.
The S&P/ASX200 did manage to claw back some of its morning losses on Wednesday as dip-buyers snapped up bargains in afternoon trading.
The benchmark index finished 55.9 points lower at 7,547.7, a drop of 0.74 per cent, after falling as much as 1.5 per cent in the first 10 minutes of trading.
The broader All Ordinaries finished down 57.3 points, or 0.73 per cent, to 7,790.5.
The losses came after the US Labor Department reported overnight that US consumer prices rose by 3.1 per cent in the year to January, higher than the expected 2.9 per cent rise that analysts were expecting.
"It doesn't seem dramatically bigger, but certainly was enough to see a major downdraft in terms of the US share market," said Commsec chief economist Craig James.
The Dow Jones Industrial Average dropped 1.4 per cent, its biggest loss in 11 months, with the losses bleeding over into Australian trading.
The readout was a reminder that the challenges are daunting around the "last mile" in returning inflation to target, GSFM investment strategist Stephen Miller said, and it might shake market complacency about the likely course of interest rates and bond yields.
It would likely lead the Fed to retain a "high for longer" mantra, pushing off any rate cuts perhaps not until the second half of the year, Mr Miller added.
Every sector except industrials and consumer discretionary shares finished lower on Wednesday, with tech the biggest loser, dropping 1.3 per cent.
Commonwealth Bank fell 1.7 per cent to $114.07 as Australia's biggest bank posted a $5.02 billion cash profit in the six months to December 31, down three per cent from the first half of 2022/23.
ANZ dropped 1.4 per cent to $27.81, Westpac retreated 1.8 per cent to $24.12 and NAB dipped 1.3 per cent to $32.51.
In the heavyweight mining sector, BHP fell 0.8 per cent to $45.95, Fortescue dropped 2.1 per cent to $27.69 and Rio Tinto dipped 0.6 per cent to $128.26.
Gains for Seven Group Holdings, Downer EDI and Computershare were buoying the industrial sector as those companies reported earnings.
Seven Group climbed 7.0 per cent to a one-year high of $38.91 as Kerry Stokes' operating and investment group delivered first-half earnings of $764 million, up 28 per cent from a year ago, thanks to outperformance of its industrial services segment.
Downer soared 11.1 per cent to a 14-month high of $4.79 after the integrated services company delivered $80.2 million in first-half profit, up 3.8 per cent from a year ago.
Computershare grew 4.9 per cent to a four-month high of $26.29 after the share registry said hiked its interim dividend by a third and announced its first-half revenue was up 6.2 per cent to $1.6 billion.
Elsewhere, Domain dropped 2.3 per cent to a nearly two-week low of $3.38 after the real estate website said its first-half profit was up 48.7 per cent to $25.8 million.
E&P Capital analyst Entcho Raykovski said Domain's listing growth had significantly underperformed REA Group's, which he said would raise further questions about its market share.
Meanwhile in currency, the US dollar surged on the inflation report, sending its Australian counterpart to its lowest level against it since mid-November.
The Aussie was buying 64.66 US cents, from 65.21 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Wednesday down 55.9 points, or 0.74 per cent, to 7,547.7.
* The broader All Ordinaries dropped 57.3 points, 0.73 per cent, to 7,790.5
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.66 US cents, from 65.21 US cents at Tuesday's ASX close
* 97.42 Japanese yen, from 97.45 yen
* 60.40 Euro cents, from 60.53 Euro cents
* 51.34 British pence, from 51.65 pence
* 106.45 NZ cents, from 106.72 NZ cents.
