At noon on Wednesday the benchmark S&P/ASX200 index was down 97.1 points, or 1.43 per cent, to 6709.3, while the broader All Ordinaries had fallen 99.1 points, or 1.41 per cent, to 6930.9.
CMC Markets APAC & Canada markets analyst Tina Teng said in a note that risk-off sentiment was prevailing ahead of its two-day monthly meeting, which begins on Wednesday night and concludes Thursday morning, Australia time.
Markets were pricing in an 84 per cent chance of a 75 basis point hike in US interest rates, with a 16 per cent chance of a full 100 basis point hike, Ms Teng wrote.
"The drop in risk assets could provide a rebounding opportunity if the Fed turns less hawkish as a 75-bps rate hike should have been priced in," she added.
Every sector of the ASX was down at midday, with mining the worst hit, dropping 2.3 per cent.
BHP was down 2.5 per cent to $38.21, Fortescue Metals had fallen 2.7 per cent to $16.83 and Rio Tinto had dropped 3.0 per cent to $91.88.
Pilbara Minerals was a rare gainer, adding 1.4 per cent to $4.96.
Coalminers were also in the green, with Whitehaven Coal up 5.0 per cent to $9.06, breaking the $9 mark for the first time ever. New Hope had added 3.5 per cent to $6.15 after Tuesday's stellar earnings results.
Viva Energy was up 5.1 per cent to $2.765 after agreeing to buy more than 700 Coles Express stores from Coles for $300 million.
Mostly, though, losses were the order of the day. All of the big retail banks were down, from 1.2 to 1.4 per cent.
Wesfarmers had dropped 2.0 per cent to $41.12.
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