US stocks slumped overnight as investors dumped shares of companies in growth and cyclical sectors, with energy and technology leading declines, on fears that the escalating US-China trade war will stymie global economic growth.
Further fuelling trade fears among investors, Beijing said Washington must correct its "wrong actions" for trade talks to continue after the US blacklisted Huawei Technology last week.
Among S&P 500 sectors, only utilities and real estate, both considered defensive areas, registered gains as investors moved to safe-haven assets such as Treasuries. Stocks pared losses in the last hour of trading, but Wall Street's major indexes all ended more than 1 per cent lower on Thursday.
Shares of S&P 500 technology and industrial companies, two sectors that have been bellwethers of trade sentiment, fell 1.7 and 1.6 per cent, respectively. Shares of S&P 500 companies in the cyclical financial and energy sectors also tumbled, with the 3.1 per cent drop in energy shares leading losses among S&P 500 sectors.
A 5 per cent plunge in oil prices in response to a dampened outlook for demand impeded energy shares, while a drop in 10-year Treasury yields, which hit their lowest level since October 2017, held back financial shares.
Adding to the downbeat mood in markets, data from IHS Markit showed US manufacturing faltered in May, with new orders falling for the first time since August 2009.
The Dow Jones Industrial Average fell 286.14 points, or 1.11 per cent, to 25,490.47, the S&P 500 lost 34.03 points, or 1.19 per cent, to 2822.24 and the Nasdaq Composite dropped 122.56 points, or 1.58 per cent, to 7628.28.
Stocks succumbed to selling pressure in May after Washington and Beijing engaged in tit-for-tat tariffs and other retaliatory measures, with the S&P 500 on track to post its first monthly decline since the December sell-off.
Shares of NetApp tumbled 8.1 per cent, the biggest percentage drop on the S&P 500, after the data storage equipment maker forecast current-quarter profit and revenue below Wall Street estimates.
L Brands shares jumped 12.8 per cent after the owner of Victoria's Secret and Bath & Body Works reported better-than-expected quarterly earnings.
The Australian share market closed lower for the first time in seven days following losses by the mining, energy and financial sectors.
The benchmark S&P/ASX200 index finished 18.9 points, or 0.29 per cent, to 6,491.8 points, while the broader All Ordinaries was down 13.8 points, or 0.21 per cent, to 6,584.3.
The energy sector was the biggest loser, down 1.26 per cent, after oil prices dropped following an unexpected rise in US crude inventories.
Woodside Petroleum was down 1.1 per cent to $36.99, Oil Search fell 1.8 per cent to $7.58 and Santos was down two per cent to $7.21.
The financial sector was down one per cent as a whole, with all of the big banks in the red following a strong performance earlier in the week.
Westpac was down 2.26 per cent to $28.16, Commonwealth Bank was down 1.1 per cent to $78.15, ANZ dropped 1.6 per cent to $27.94 and NAB was down 1.4 per cent to $25.78.
Miners were also down following a drop in metal prices, with BHP falling two per cent to $37.32 and Rio Tinto down 0.7 per cent to $100.98.
Other sectors were positive, with tech stocks up 1.6 per cent and consumer discretionary shares up two per cent.
Pokies manufacturer Aristocrat Leisure was the best performer on the ASX200, up 7.1 per cent to $28.40 after lifting its first-half profit 15 per cent to $356.5 million.
Wesfarmers gained 1.56 per cent to $37.70 after entering into a scheme implementation deed to buy lithium miner Kidman Resources for $1.90 per share.
The $776 million takeover could be completed by September, assuming courts and Kidman shareholders agree to it.
Kidman shares rose 0.9 per cent to $1.90, having risen 47 per cent since Wesfarmers announced the takeover offer.
The Reject Shop was down 7.5 per cent to $2.10 after the discount retailer said it expected a full-year loss and announced store closures and the exit of its chief executive.
Kogan.com shares fell 6.4 per cent to $5.85 after the Australian Competition and Consumer Commission said it would sue the retailer for allegedly misleading discounting practices.
Kogan denied doing anything wrong and said it would defend the lawsuit.
Fonterra shares were down 0.51 per cent to $3.94 after the New Zealand-based dairy processor cut its full-year guidance and said it would close a century-old factory in western Victoria that employs 98 people.