The big four banks were hit amid fears a US debt default will result in another credit crisis. NAB led the declines, giving up more than 2%.
Material stocks suffered from the increased risk aversion. Platinum Australia was the hardest hit (-11%) after ceasing operations at its Smokey Hills mine.
Toll road operator, Transurban, was off more than 3% after the Canadian Pension Plan divested its stake in the group.
The ASX 200 slumped 73 points (-1.6%), settling at 4530.