Australian stocks have plunged as investors price in the chance of two interest rate hikes in the US this year.

Strong economic data out of the world’s largest economy overnight had exposed a divergence in rate expectations, CMC chief market analyst Michael McCarthy said.

US consumer spending surged in May, with the biggest monthly increase in nearly six years.

Mr McCarthy said the days of the US consumer driving global demand might be returning.

“The interest rate markets look to be pricing one rise this year whereas the Fed has been flagging the desire to get started and expectations are implying two rises this year,” he said.

“So there’s a bit of a disconnect, and that strong number that we saw overnight, particularly in 0.9 per cent increase in personal spending, was well above expectations.”

Investors are also concerned about Greece’s debt crisis, with a solution appearing a long way off despite the looming default deadline.

Chinese markets have also plunged on Friday, another negative influence for local traders.

BHP Billiton had lost 90 cents to $27.61, Rio Tinto had shed $1.32 to $54.35 and Fortescue Metals was nine cents weaker at $2.03.

Commonwealth Bank was down 70 cents at $86.64, National Australia Bank had lost 42 cents to $34.03, ANZ was 29 cents lower at $33.15 and Westpac had reversed 43 cents to $32.86.

Property stocks were also significantly weaker, with Mirvac down 9.25 cents at $1.8425 and Stockland 13.5 cents weaker at $4.145.

Woolworths provided one bright spot, adding $1.25, or 4.7 per cent, to $27.63.

KEY FACTS

* At 1200 AEST on Friday, the benchmark S&P/ASX200 index was down 87.8 points, or 1.6 per cent, at 5,544.9 points.

* The broader All Ordinaries index was down 84 points, or 1.5 per cent, at 5,535.9 points.

* The September share price index futures contract was 66 points lower at 5,497 points, with 22,493 contracts traded.

* National turnover was 1.08 billion securities worth $5.04 billion.