At 10:30 (AEST), the benchmark S&P/ASX 200 index lost 33.20 points, or 0.48 percent, to 6,852.70, while the broader All Ordinaries index was down 32 points, or 0.45 percent, at 7,123.50.
Only 2 out of 11 sectors managed a rise in the morning trade, led by information technology, which rallied at 1.37 percent.
Consumer staples also outperformed as Australia's biggest supermarket chains Coles and Woolworths bounced back in the session, although the gains were trending steadily smaller amid downbeat sentiment.
Energy and materials were the biggest weight on the market, slumping 2.28 percent and 1.12 percent respectively, fuelled by the drop in oil price and iron ore mining companies' losses
"Higher than expected US jobless claims failed to raise stimulus expectations in overnight trading," CMC Markets chief market strategist Michael McCarthy said.
"Instead of rallying on the 'bad news is good news' dynamic, stocks fell and the global bond sell-off resumed. Despite U.S. Federal Reserve reassurances, it appears inflation concerns are stalking markets."
In the financial space, Australia's big banks dropped with the Commonwealth Bank down (0.61 percent), National Australia Bank down (0.86 percent) and Westpac Bank down (1.19 percent). However, ANZ was up (0.57 percent).
Mining stocks were mostly lower with Rio Tinto down (1.56 percent), BHP down (0.54 percent), Fortescue Metals down (2.09 percent), however gold miner Newcrest was up (0.58 percent).
The country's oil and gas producers plummeted with Oil Search down (3.07 percent), Santos down (1.42 percent), and Woodside Petroleum down (3.55 percent).
Australia's largest supermarkets bounced with Coles up (0.92 percent), and Woolworths up (0.43 percent).
Meanwhile telecommunications giant Telstra was up (0.15 percent) and the national carrier Qantas improved (0.85 percent), while biomedical firm CSL sank (1.84 percent).
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