The ASX was down about one per cent on Friday and almost all categories were lower after US annual inflation rose to 7.5 per cent.
The hefty inflation reading has stoked fears the US Federal Reserve will raise rates aggressively. Wall Street tumbled.
On the ASX, property shares fell most sharply. They were down three per cent.
There were drops of two per cent for information technology and utilities.
Artificial intelligence software vendor Appen declined seven per cent to $8.35.
Gas provider AGL slumped six per cent to $6.81 a day after returning to first-half profit.
The only category higher was materials, although this was little changed.
The benchmark S&P/ASX200 index was down 76 points, or 1.04 per cent, to 7212.5 points at 1200 AEDT.
The All Ordinaries index was lower by 84.4 points, or 1.11 per cent, to 7511.1 points.
The market is about 400 points below its record high of 7632.8 points reached in August.
Meanwhile in Australia, Reserve Bank governor Philip Lowe has reiterated to federal politicians that an interest rate rise in 2022 is plausible.
Yet he also warned raising the cash rate too early from its record low of 0.1 per cent could risk an expected decline in the unemployment rate to less than four per cent this year.
There were fewer companies reporting earnings on Friday, which helped insurer IAG garner attention.
The company turned a first-half profit and is looking forward to a favourable operating environment over the next six months.
IAG reported a net profit of $173 million for the half-year ended December, after a loss of $460 million in the previous corresponding period, on revenue of $9.2 billion.
The interim payout was six cents per share, down from seven cents at the same time last year.
IAG was up two per cent to $4.65.
The competition watchdog will not oppose Wesfarmers' purchase of Australian Pharmaceutical Industries.
Wesfarmers has tabled a $763 million offer worth $1.52 per share for the Priceline Pharmacy owner.
API investors are expected to vote in March on whether to approve.
Wesfarmers was down one per cent to $52.77.
API was little changed at $1.52.
The banks were mixed. The Commonwealth Bank fared worst of the majors, shedding one per cent to $99.06. NAB and Westpac were best and were little changed at $29.69 and $22.65 respectively.
Miner Yancoal was one of the best-performing major stocks. Its shares were up three per cent to $3.07.
Among the giants of the industry, BHP and Rio Tinto rose one per cent each to $48.81 and $120.97 respectively. Fortescue was up half a per cent to $22.40.
The Australian dollar was buying 71.42 US cents at 1200 AEDT, lower than 71.73 US cents at Thursday's close.
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