At 11:00 (AEST), the benchmark S&P/ASX 200 index was down 127.00 points or 2.42 percent at 5,131.60, while the broader All Ordinaries index was down 124.10 points or 2.35 percent at 5,166.60.
Most sectors were firmly lower with the exception of energy which edged higher. The banks were the biggest weight on the market, plummeting close to 5 percent.
"Emerging economic optimism was trounced overnight. European manufacturing contracted further in March, adding to concerns about the slashing of banks dividends to zero," CMC Markets chief market strategist Michael McCarthy said.
In the financial space, Australia's big banks plummeted with the Commonwealth Bank down 5.21 percent, ANZ down 5.43 percent, National Australia Bank down 4.60 percent and Westpac Bank down 4.19 percent.
Mining stocks were mostly lower with Rio Tinto down 1.86 percent, BHP down 1.75 percent, however goldminer Newcrest was up 3.25 percent.
The country's oil and gas producers rallied with Oil Search up 2.61 percent, Santos up 3.73 percent and Woodside Petroleum up 0.92 percent.
Australia's largest supermarkets were mixed with Coles up 1.33 percent, and Woolworths down 0.39 percent.
Meanwhile, telecommunications giant Telstra sank 2.19 percent, the national carrier Qantas lost altitude 3.85 percent and biomedical firm CSL sank 0.46 percent.
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