Around $34 billion has been wiped from the share market in its largest daily fall in 15 months because of renewed concerns about global economic growth.
The S&P/ASX 200 index fell two per cent, its largest one-day drop since June 20, 2013.
Worries about global growth worsened overnight as economic growth forecasts for Germany, Europe’s largest economy, were lowered.
“It’s growth concerns that sparked this, particularly concerns that Germany is imploding,” CMC chief market analyst Michael McCarthy said.
“Fear of a negative scenario is driving global investing at the moment.”
Mr McCarthy expects market volatility to continue into next week, likely to cause more large swings before the market stabilises.
Local indices could slump as low as 5050 points, signifying a technical correction of 10 per cent since September 3, he said.
Energy companies recorded the biggest falls on Friday after oil prices tumbled.
Woodside Petroleum dropped $1.06, or 2.7 per cent, to $38.70, Santos lost 45 cents to $12.59 and Oil Search was 35 cents weaker at $8.35.
Coal stocks also took a hit after China said it will impose levies on coal imports from next week to boost its coal industry.
Whitehaven Coal shares lost 14.5 cents, or 8.8 per cent, to $1.50 and New Hope Corporation dropped 18 cents, or 6.9 per cent, to $2.42.
Losses in most sectors were significant.
BHP Billiton fell 91 cents to $32.31, Rio Tinto dropped $1.77 to $57.26 and Fortescue Metals was nine cents lower at $3.26.
Among the banks, Commonwealth Bank dropped $1.43 to $74.80, ANZ lost 60 cents to $31.22, Westpac shed 62 cents to $32.25 and NAB was 55 cents weaker at $31.92.
KEY FACTS
* At the close on Friday, the benchmark S&P/ASX200 index was down 108.4 points, or 2.05 per cent, at 5,188.3.
* The broader All Ordinaries index was down 107.6 points, or 2.03 per cent, at 5,185.7.
* The December share price index futures contract was 121 points lower at 5,158, with 42,972 contracts traded.
* National turnover was 2.09 billion securities worth $5.8 billion.
