Australian shares slumped 2.6 percent to their lowest close in 26 months on Thursday, as evidence of a slowdown in China and a warning from the Federal Reserve that the United States faced a grim economic outlook rattled investors. Shares started weak after US policymakers signalled significant downside risks to growth and fell further after data showed China's factory sector contracted for a third consecutive month in September.
Shares in brewer Foster's Group bucked the trend. The stock jumped 8 percent to A$5.26 after brewing giant SABMiller agreed to buy it for a sweetened price of $10 billion on Wednesday. Shareholders welcomed the new A$5.10 a share offer, worth more with a capital return and dividend.
"The market is reflecting the concerns over global recovery and policymakers dragging the chains. Doubts are arising whether they have the necessary tools now," said Shane Oliver, head of investment strategy at AMP Capital Investors. Global miner Rio Tinto had its biggest one-day percentage fall since June 2009, dropping 6.5 percent while rival BHP Billiton lost 4 percent as copper prices plunged to a 10-month low. Top banks all shed at least 2 percent as investors feared global economic woes could raise their cost of funds and hurt profitability. The S&P/ASX 200 index ended down 106.90 points at 3,964.9, according to latest available data, its lowest closing level since July 2009. The benchmark rose 0.8 percent on Wednesday.