The ASX 200 has taken a battering in September with it closing down 7.5 per cent.
That is the benchmark's worst month in the previous three months.
It tracks a broad global sell-off, as recession fears mount in the US as its Federal Reserve fails to temper fears about more rate hikes.
The ASX 200 closed Friday down 1.3 per cent 6,474 points.
The bottom performing stocks were Carsales and Cochlear, down 7.8 and 6.6 per cent respectively.
Nine of 11 sub-indices ended in the red. The financials index that includes the Big Four lost 2.3 per cent.
At the same time, the Australian dollar was down against the greenback at 64.95 US cents. That's as the US dollar rises on projections rates will rise.
Investors added another cycle of selling after Fed officials gave no indication about the US central bank changing its view on rate hikes, leaving investors skittish about a potential recession in the country.
Back home, the Australian central bank is likely to hike interest rate by another 50 basis points in October in its most aggressive tightening cycle since 1990s to curb red-hot inflation, according to a Reuters Poll.
Gold stocks were the top gainers, with some surging as much as 8 per cent.
Wall Street ends down sharply
On Thursday, US investors added another cycle of selling as the dollar barely eased its stranglehold on currency markets, recession fears sapped stocks and bonds suffered more interest rate pain.
After a partial rebound on Wednesday, US stocks fell sharply overnight.
The Dow Jones Industrial Average fell 1.5 per cent, the S&P 500 lost 2.1 per cent, to a new low for 2022, and the Nasdaq Composite dropped 2.8 per cent, weighed down by big technology names such as Apple and Amazon.
European stocks also suffered. The STOXX 600 share index was down 1.7 per cent, even as the euro and the pound — hammered over the last week by UK debt concerns — recovered some ground, gaining 0.6 per cent and 1.7 per cent respectively.
China currency intervention talk was gathering momentum, too, while Europe's government bond markets were braced for the highest German inflation reading since the 1950s.
Gilt selling also resumed a day after the Bank of England (BoE) dramatically intervened to try to quell the storm surrounding the British government's new spending plans.
"It's a pick-your-poison collection of bad news for investors," portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico, Sean Sun said in an email.
"From strong jobs data pushing the Fed to be more hawkish, to the turmoil in the entire UK stock and bond markets, to China intervening to prop up the yuan, with increasing geopolitical issues, investors are left few places to hang their hats."
UK seeks stability
The UK 10-year gilt yield — which drives Britain's borrowing costs — rose about 8 basis points to 4.214 per cent, after falling almost 50 bps the day before, due to the BoE's sudden intervention, although the 30-year yield being targeted by the central bank was little changed, at 3.96 per cent.
Barings Investment Institute's chief European strategist, Agnes Belaisch, said: "The market wouldn't mind some stability … [because] it has become a little bit unpredictable."
She said investors were now seeing "incoherence" in Britain, with government spending as the BoE tries to rein in inflation, while everywhere else the focus is on how high central banks are prepared to go with interest rates.
New British Prime Minister Liz Truss defended her new economic program — that has sent sterling to a record low this week and left the UK's borrowing costs close to Greece's — saying it was designed to tackle the difficult situation Britain was now in.
"We are facing difficult economic times," Ms Truss said on local BBC radio.
"I don't deny this. This is a global problem. But what is absolutely right is the UK government has stepped in and acted."
The CBOE VIX Index — a measure of Wall Street's volatility expectations — jumped 6.5 per cent, although it is still off levels seen earlier in the week.
Getting inflation in check
Zooming back out, it was still about the dollar, which has crushed currencies virtually everywhere this year, as well as the impact of Russia's invasion of Ukraine.
Speaking with reporters in London on Wednesday, veteran Federal Reserve policymaker Charles Evans gave no indication that any of the recent foreign exchange and bond market drama would blow the US central bank off its rate hike course.
"We just really need to get inflation in check," Mr Evans said, backing lifting the Fed's rates — now at 3 per cent to 3.25 per cent — to a range of 4.5 per cent to 4.75 per cent by the end of the year or March.
Federal Reserve Bank of Cleveland president Loretta Mester echoed that on Thursday, saying she did not see distress in US financial markets that would alter the Fed's campaign.
Such comments helped push the yield on US government bonds.
The yield on 10-year Treasury notes was up 6.5 basis points to 3.772 per cent and 30-year Treasury bonds rose 2.9 basis points to 3.710 per cent.
Thursday's currency moves saw the US dollar index — which measures the currency against its peers — hang around its recent, 20-year high again, down about 0.4 per cent, having had its worst session in two-and-a-half years on Wednesday.
"Despite substantial appreciation, year-to-date, we see little pressure for policymakers to respond to dollar strength for now," Morgan Stanley strategists wrote in a note released Thursday.
"Trade-weighted dollar strength is not excessive, in sync with broadly tighter financial conditions and in line with Fed objectives, though inflation benefits are small."
Overnight, China's yuan fell again, too, although it stayed just off recent post-financial crisis lows, as China's central bank said stabilising the foreign exchange market was its top priority and on reports of potential FX intervention too.
MSCI's broadest index of Asia-Pacific shares outside Japan ended the day virtually flat, although Japan's Nikkei did manage a near 1 per cent rise.
Meanwhile, in the US, weekly jobless claims data bucked expectations, with an unexpected fall showing how tight the country's labour market remains.
US GDP fell at an unrevised 0.6 per cent annualised rate last quarter, the government said in its third estimate of GDP. The economy contracted at a 1.6 per cent rate in the first quarter.
Oil prices were ticked down, still weighed by the stronger dollar and weak economic outlook, even as OPEC+ began discussions about an oil output cut.
Brent crude oil ended at $US88.49, down 0.9 per cent on the day.
ABC/Reuters
