The S&P/ASX200 fell 32.1 points, or 0.41 per cent, to 7828.3 points on Wednesday, while the broader All Ordinaries was down 34.6 points, or 0.43 per cent, to 8055.3.
The slump followed a sell-off on Wall Street overnight after ratings agency Fitch downgraded its US economic growth outlook from 2.1 per cent to 1.7 per cent over new and incoming tariffs from the White House.
"Apart from the direct impacts of tariffs, the elevated uncertainty around US policy will also likely weigh on business investment and potentially consumer activity," NAB economists wrote in a research note.
"As a result, financial markets have come under stress, particularly US equities, with weak early 2025 economic data for the US also a factor."
Utilities led the losses on the local bourse, down 1.6 per cent, followed by real estate, which slipped 1.3 per cent, while IT stocks and industrial lost one per cent each.
Healthcare stocks edged 0.5 per cent higher, while energy and telecommunications stocks eked out sub-0.2 per cent gains.
Financial stocks finished 0.3 per cent lower, with three of the big four banks in the red, as NAB clawed-back a meagre 0.2 per cent of its more than 3.5 per cent slump since Monday.
Insurers provided a life raft in the financials sea of red, with QBE posting a 4.1 per cent gain and Suncorp and IAG lifting more than 1.5 per cent as their rebound from ex-tropical cyclone Alfred continued.
Mining giants BHP, Rio Tinto and Fortescue all closed lower, tracking with a 0.5 per cent slump in the iron ore price towards $US102 a tonne.
Rio Tinto's board has urged shareholders to reject a plan from UK hedge fund and activist investor Palliser Capital to ditch the group's dual listing to trade solely on the ASX.
Oil prices slipped after Russia agreed to a partial ceasefire deal for Moscow and Kyiv to temporarily spare each other's energy infrastructure, likely leading to more Russian barrels on the market.
Brent crude futures were trading just below $US70 a barrel.
Spot gold reached a record high, briefly topping $US3045 an ounce as the safe haven goes from strength to strength.
Pinnacle Investment Management Group was the worst performer of the top 200, shedding 5.4 per cent two days out from a dividend payout.
Investors will look to the US Federal Open Market Committee meeting overnight - where an interest rate hold is all but certain - with a laser focus on the central bank's economic outlook for the US.
The Australian dollar lost ground against the greenback, buying 63.58 US cents, down from 63.73 US cents on Tuesday at 5pm.
ON THE ASX:
* The benchmark S&P/ASX200 index rose 32.1 points, or 0.41 per cent, to 7828.3 on Wednesday
* The broader All Ordinaries was up 34.6 points, or 0.43 per cent, to 8055.3
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 63.58 US cents, from 63.73 US cents at 5pm on Tuesday
* 92.22 Japanese yen, from 95.44 Japanese yen
* 58.16 euro cents, from 58.41 euro cents
* 48.97 British pence, from 49.11 British pence.
* 109.75 NZ cents, from 109.52 NZ cents
22°C