Geopolitical tensions and further falls in iron ore sparked broad-based selling on the ASX on Tuesday, with losses in BHP Billiton and Telstra leading the slide.
Investors fled telecommunications shares - the biggest drag on the market - with energy and materials also under pressure.
The benchmark S&P;/ASX 200 Index closed down 0.9 per cent to 5836.7 points and the broader All Ordinaries Index was off 1 per cent to 5868.7 points.
"Aside from the falls in iron ore, the situation in North Korea has certainly captured the attention of investors around the region," said Romano Sala Tenna, portfolio manager at Katana Asset Management.
"It's a bit surprising the market has sold off as much as it has, but it does seem like the global situation is escalating and that's driving the overall mood."
Investors favoured the relative safety of ASX-listed healthcare names such as CSL and ResMed, which advanced 0.6 per cent and 1.3 per cent, respectively. Toll-road operator Transurban advanced 1 per cent.
Shares around the region were mixed: Hong Kong's market suffered from the same geopolitical woes as the ASX while the export-heavy Japanese stock market lifted as the yen weakened.
Weakness in commodity markets prompted investors to punish the major resource players, while oil and gas companies suffered as crude oil fell.
BHP was off 1.6 per cent, while main rival Rio Tinto was off 1.9 per cent. Fortescue Metals tumbled 7.5 per cent as Chinese iron ore futures continued to slide. The spot price for the bulk commodity was set at $US66.25 a tonne on Monday night, bringing the year's losses to 30 per cent from its February high.
South32 slipped 1.4 per cent after it announced it would not proceed with a coal acquisition. Woodside Petroleum, Australia's biggest oil company, closed down 0.4 per cent.
Despite the broad risk-off sentiment, gold miners failed to move higher after the precious metal eased over the weekend to fetch $US1283.7 an ounce on Tuesday afternoon. Investors fled Australia's largest gold producer Newcrest, which closed down 4.6 per cent, partly as a result of production interruptions at its Cadia operation. Regis Resources was off 5.8 per cent.
There wasn't much appetite for the big four banks either, which all closed between 0.7 and 0.9 per cent lower.
Stock watch: TPG Telecom
Shares in TPG Telecom dropped 16 per cent to $5.50 after the company came out of a trading halt on Tuesday, having completed a $400 million capital raising intended to fund its $1.9 billion plan to start Australia's fourth mobile network. Last week TPG paid a higher-than-expected price for the spectrum on which the network will rely. That and its "higher risk" strategy led several analysts to downgrade their price targets for the telco. Credit Suisse cut its price target to $5.50, from $6.20, while maintaining a sell rating. At the other end of the spectrum, Morgan Stanley maintained a buy rating with a $10 price target. Analyst opinion is split - 6 analysts rate TPG a sell while the same number have it as a buy.
Telstra
Deutsche Bank analysts upgraded Telstra to a buy, arguing that its selloff has gone too far. The telco's shares have lost over 20 per cent of their value this year, including a further 3.8 per cent on Tuesday as expectations of TPG's entry into the mobile market depressed profit margin expectations in the sector. "Despite the negative impacts from a new mobile entrant we believe Telstra is now an appealing investment given a sustainable dividend yield of 6.6 per cent, potential capital return, [a] 39 per cent price-earnings discount to the market and upside implied by our target price," the analysts wrote.
RBA minutes
In a sign of likely policy constraint, minutes of the Reserve Bank of Australia's April board meeting specifically mentioned the need to pay heed to both housing and jobs. "Developments in the labour and housing markets warranted careful monitoring over coming months," the central bank said. Official interest rates were left at a record low 1.5 per cent two weeks ago - or a seventh straight meeting - just as regulators started a renewed crackdown on riskier bank lending. Financial markets are still factoring a slim chance of another official rate cut this year. The Aussie dollar dipped slightly.
North Korea
North Korea will continue to test missiles, and any military action against it by the United States would prompt "all out war", a senior North Korean official told the BBC on Monday. North Korea has conducted several missile tests in defiance of UN sanctions and claims it can strike the US mainland. Its latest missile test failed a few seconds after launch. US Vice President Mike Pence warned North Korea on Monday that recent US strikes in Syria, one of Pyongyang's few close allies, showed that the resolve of President Donald Trump should not be tested.
Tax setback
The US Treasury secretary conceded that the administration's timetable for ambitious tax reforms is set to slip following setbacks in negotiations with Congress over healthcare. Steven Mnuchin said the target to get tax reforms through Congress by August was "highly aggressive to not realistic at this point". "It started as [an] aggressive timeline," he said in an interview with the Financial Times. "It is fair to say it is probably delayed a bit because of the healthcare." Mr Mnuchin insisted he still expected the tax system to be reformed in 2017.
