The Australian sharemarket is on track for its biggest two-day fall since the start of the Covid pandemic, as a rout engulfs the world’s markets.

Mounting fears of a US recession are behind Monday’s global share plunge – with Japan’s Nikkei 225 share index plunging nearly 13 per cent as investors worried the US economy might be in worse shape than had been expected.

The Nikkei index was down 12.9 per cent at 31,290.63 by mid-afternoon on Monday in Tokyo. It dropped 5.8 per cent on Friday and is headed for a record two-day decline.

The Nikkei’s biggest single-day rout was a plunge of 3836 points, or 14.9 per cent, on the day dubbed “Black Monday” in October 1987.

Back in Australia, the the benchmark S&P/ASX200 index was down 229.4 points, or 2.89 per cent, to a six-week low of 7713.8 at midday.

That put it on track for a 5 per cent loss over the past two days of trading, after it finished 2.11 per cent lower on Friday.

The broader All Ordinaries had dropped 240.4 points, or 2.94 per cent, to 7930.

Not since March 2020, when markets were spooked by the outbreak of the pandemic, has the local bourse experienced such a vicious two-day sell-off.

“I think we’re in a fairly messy position here,” AMP chief economist Shane Oliver told Sky News.

“It looks to me like the inflation scare we saw earlier in this year in the US and more recently in Australia, has unnecessarily delayed monetary easing.

“Now, of course, the financial markets are starting to worry about that higher risk of recession.”

Global markets were rattled after US non-farm payrolls data released on Friday showed unemployment jumped to a near three-year high of 4.3 per cent, triggering the Sahm rule.

That rule says a recession is likely under way if the three-month average of the unemployment rate rises by half a percentage point in a year.

However, NAB senior economist Taylor Nugent said it didn’t necessarily mean the US would enter a recession, and strong growth in labour force participation would somewhat temper the rise in unemployment.

“Regardless, it doesn’t take a recession to justify less restrictive policy,” he said.

On Friday, Japan’s Nikkei plunged 5.81 per cent. Meanwhile on Wall Street, the Dow Jones Industrial Average fell by more than 1.5 per cent, the S&P500 slipped 1.84 per cent and the IT-heavy Nasdaq sank 2.43 per cent.

IT stocks also led the way down on the ASX, ceding 4.9 per cent, while the remaining 10 industrial sectors were also more than 1.5 per cent in the red.

Australia’s biggest company by market capitalisation, BHP, was down 1.6 per cent, while fellow iron miner Fortescue fell 1.4 per cent.

Rio Tinto bucked the trend, edging 0.2 per cent higher.

CBA and Westpac both fell 3.7 per cent, while NAB and ANZ slumped 3.9 per cent.

Oil and gas giant Woodside fell 3 per cent to a 2½-year low of $26.67 amid reports the proposed $30 billion-plus Browse development off Western Australia failed to get state environmental approval.

Sleep apnoea device manufacturer ResMed was one of Monday’s few winners, up 3.6 per cent to $32.93 after reporting positive earnings results last week.

But it was less positive for private hospital operator Ramsay Health Care. It retreated 1.7 per cent after flagging its full-year earnings, to be announced later in August, will be weaker than expected.

The Australian dollar was buying 65.04 US cents, from 65.25 US cents at Friday’s ASX close.

Elsewhere, the growing recession worries in the US are expected to bolster the case for keeping interest rates on hold in Australia in Tuesday’s Reserve Bank announcement.

Betashares chief economist David Bassanese said the new concerns about the US economy would likely be the “final nail in the coffin” for the case to lift interest rates.

-with AAP