Australian shares closed at a more than one-month low on Monday as investors fled to more conservative assets on growing concerns about a possible US recession, while gold stocks rose on safe-haven demand for the metal. US Treasury 10-year note yields dropped below three-month Treasury bill yields for the first time since 2007 on Friday after disappointing US manufacturing data and cautious remarks by the US Federal Reserve last week.
Traditionally, an inverted yield curve - characterised by long-term rates falling below their short-term counterparts - has signalled a looming recession.
The S&P/ASX 200 index fell 1.1 percent to 6,126.20 at the close of trade. The benchmark firmed 0.5 percent on Friday.
"The domestic market has run pretty hard over the last couple of months, so I suspect there is a bit of profit taking around,"
said Heuristic Investment Systems co-founder Damien Hennessy.
"The fundamentals haven't really improved as yet and it looks like they're continuing to deteriorate. Until such time that fundamentals begin to stabilise, it's going to be difficult to sustain rallies we've had in the last couple of months."
Aussie shares have gained nearly 10 percent so far this year.
Financials and materials stocks led broad-based losses on Monday, with the country's top four banks falling in the range between 0.9 to 2.3 percent.
Commonwealth Bank of Australia, the biggest among them, ended 0.9 percent lower.
Westpac Banking Corp fell as much as 1.9 percent to a more than five-week low after flagging a A$260 million drop in first-half cash earnings due to provisions for customer refunds in the wake of an inquiry into financial sector wrongdoing.
Australian-listed shares of global miners BHP Group and Rio Tinto, hit by lower copper prices, led the declines among miners with falls of 1.3 percent and 1.1 percent, respectively.
However, growing fears about a global economic slowdown fuelled safe-haven buying, pushing gold miners 2.3 percent higher.
Gold heavyweight Newcrest Mining finished up 3.2 percent, its highest closing level since July 2016.
New Zealand's benchmark S&P/NZX 50 index fell 0.3 percent, or 31.68 points, to 9,519.31.
The index closed at a record high on Friday.
Local-listed shares of Australia and New Zealand Banking Group were the top percentage decliners on the benchmark, down 3 percent, while outdoor apparel maker Kathmandu Holdings ended 2.8 percent lower.