Australian stocks slump 3.51pc

At the close, the benchmark S&P/ASX 200 was down 149.3 points at 4,101.9 on the back of the Dow Jones Industrial Average falling 3.7 percent overnight, with the carnage even worse in Europe.

"Given the bloodbath seen across global equity markets overnight it is not at all surprising to see our market experiencing sharp and broad based losses," said IG Markets analyst Ben Potter, adding that there was no end in sight.

"From experience, these situations always go on for a lot longer than people think they should.

"Given the global financial crisis is still so fresh in people's minds, the market is going to have to do a lot to win back the confidence of investors, especially the retail sector."

Shane Oliver, chief economist at AMP Capital Investors, added that the risk of recession in Europe and the United States was growing.

"Will the world go back into recession? The risks have clearly increased," he said.

"Europe is most at risk and is probably odds on to head back into recession given its debt problems."

Among major companies, BHP fell 4.0 percent, Rio Tinto plunged 5.3 percent and Commonwealth Bank was 2.9 percent lower.

The Australian dollar followed the market down, trading at 103.41 US cents late in the day, from 104.83 US cents at the close on Thursday.

Copyright AFP (Agence France-Presse), 2011