The S&P/ASX200 fell 80.2 points, or 0.97 per cent, to 8,157.8, as the broader All Ordinaries lost 82.2 points, or 0.97 per cent, to 8,374.
Energy stocks and financials weighed heavily on the bourse, down 2.9 per cent and 1.6 per cent, as all 11 sectors closed in the red.
Oil prices are again plumbing four-year lows, while Westpac's 1 per cent slip in half-year profits had investors again questioning the valuations of Australia's big four banks.
"If you look at the seven-day run, it was all pretty much driven by this news out of the United States of potential trade deals, which was very speculative," Capital.com senior market analyst Kyle Rodda told AAP.
"Today we've got some domestic news to really sink our teeth into and it says the market is not weak, but it's not particularly strong to be buying into.
"It's kind of a case of when narrative meets a touch of reality."
As energy stocks fell, as Woodside and Santos each lost more than 3.6 per cent.
Oil prices are trading below the $US60 level for the second time since February 2021, after OPEC+ agreed to hike production for a second straight month and raise June output by 411,000 barrels per day.
Financials closed 1.6 per cent weaker with Westpac down three per cent on its disappointing half-year result, followed by NAB, which dropped 1.8 per cent ahead of its first-half earnings on Wednesday.
Commonwealth Bank also fell 1.6 per cent to $166.93 after breaking above $169 for the first time last week.
Large cap miners BHP, Fortescue and Rio Tinto were all in the red as materials stocks pushed 0.6 per cent lower.
Gold Road Resources was the top-200's best performer, surging more than nine per cent to $3.25 after the takeover target entered into implementation with South African suitor Gold Fields.
Coal miner Stanmore took the wooden spoon for the day, down 5.8 per cent to $1.94, while underperforming competitors Yancoal (-2.7 per cent) and Whitehaven, which lost 1.4 per cent, also slid.
The Australian dollar hit a five-month high against the greenback and is buying 64.69 US cents, up from 64.11 US cents on Friday at 5pm.
Looking ahead, NAB will release its half-year results on Wednesday and Woodside will hold its annual general meeting on Thursday.
The US Federal Market Open Committee will take its interest rate decision on Wednesday night and while the Fed is tipped to keep interest rates on hold, investors will be looking for signs of what it will take for the central bank to cut rates.
"But obviously the complicating factor has been outlined by (Fed chair Jerome) Powell ... is that tariffs are going to come with some kind of a price shock, and the Fed doesn't want to rush into cutting interest rates into an environment where prices can be lifted," Mr Rodda said.
Investors will also look for any developments in US tariff negotiations, with zero deals publicly announced so far, 25 days into the 90-day tariff delay.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Monday down 80.2 points, or 0.97 per cent, to 8,157.8
* The broader All Ordinaries rose 82.2 points, or 0.97 per cent, to 8,374
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.69 US cents, from 64.11 US cents on Friday at 5pm
* 93.37 Japanese yen, from 93.10 Japanese yen
* 57.13 Euro cents, from 56.62 Euro cents
* 48.73 British pence, from 48.17 pence
* 108.36 NZ cents, from 108.08 NZ cents
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