$A66b wiped off Aussie shares

The Australian sharemarket has suffered its biggest one-day fall in more than two years, wiping about $A66billion ($NZ71billion) off its value.

Yesterday's plunge was twice the size of Monday's fall and comes after Wall Street was hit by a second straight session of heavy selling.

The benchmark S&P/ASX200 index dropped 192.9 points, or 3.2%, to 5833.3 points in its worst session since September 2015, erasing more than three months of gains, AAP reported last night.

Asian markets also took a hit, Japan's Nikkei dropping almost 5% and Hong Kong's Hang Seng Index more than 4%.

CMC Markets chief market analyst Ric Spooner said there were signs Wall Street's rout - due in part to rising bond yields and the prospect of rapid US interest rate hikes - was not over. Dow Jones futures were more than 2% weaker when the Australian market closed.

''People are concerned by the size of the sell-off, which has led more people to take defensive action,'' Mr Spooner said.

Some brokers in New Zealand say this is a long-predicted

correction to stock markets around the world, in the wake of bourses plunging around the world since last Friday.

All eyes will be on the US stock market this week after US stocks had the biggest one-day fall in six years on Monday as investors rushed to take profits, US bond yields having risen sharply last week, following an equities rally which hit record levels in January.

The NZX 50 index plunged more than 173 points on Monday to close at 8241.

The Australian market lost about $A33billion on Monday after Friday's sharp fall on US markets sent local investors running for the exits.

Craigs Investment Partners broker Peter McIntyre said given the stellar run of stocks in January, it was unsurprising a correction was taking place.

''This is not a GFC [Global Financial Crisis] scenario. Higher US interest rates are typically negative for equity markets ... as investors move to fixed-income market,'' he said.

''This isn't a [GFC] credit crisis; it's a reaction to good news,'' he said of rising US interest rates and the subsequent expected boost to inflation.

He said it was likely the NZX would open down today.

While some analysts in recent weeks have been talking of a 10% to 20% correction in markets, Mr McIntyre believed in the US and New Zealand the correction would be ''up to 10%''.

''If the correction is greater than 10%, it will become a buyers' market,'' he said.

If New Zealand investors had some offshore holdings, they would have ''some insulation'', given the US dollar was likely to strengthen.

In Australia, the benchmark S&P/ASX200 index fell 95.2 points, or 1.56%, to 6026.2 points, while the broader All Ordinaries Index tumbled 101.4 points, or 1.63%, to 6128.4 points.

Key equity markets in the US, Europe, Britain and Asia - bar China - all declined sharply on Monday, Wall Street being the worst performer.

US stocks' losses accelerated in afternoon trading, pushing the S&P 500 down more than 5% from its January 26 record high and the Dow below 25,000 for the first time since January 4.

On Wall St, the The CBoe Volatility index closed at its highest since August 2015.

Only last month the Dow and S&P500 had their best monthly gains in two years, stocks reaching record levels on January 26, supported by the cut in US corporate taxes in December, rising earnings and healthy global economic growth.

But with the US' Federal Reserve seen as likely to raise short-term interest rates again three or four times in 2018, bond yields have been rising, and last Friday's healthy US labour market report sparked fears of rising inflation, leading to Monday's sharp bout of profit taking.

The pan-European FTSEurofirst 300 index lost 1.51%.

More than 27billion ($A53billion) was lost off the value of London's blue-chip stocks as fears over interest-rate hikes ripped through global markets.

The FTSE 100 Index plunged 108.45 points to 7334.98, as traders began pricing in the prospect of central banks enforcing tighter monetary policy in the US, Europe and Asia.

European markets were enduring a rough ride on Monday, the Cac 40 in France dropping 1.5% and Germany's DAX losing 0.8%.

- Additional reporting by Reuters, AAP, and AP