The benchmark S&P/ASX200 ended 62.2 points, or 0.75 per cent, lower on Wednesday, at 8,193.40, while the broader All Ordinaries finished down 64.3 points, or 0.76 per cent, to 8,450.90.
It comes as US bond yields spiked overnight, prompting losses on Wall Street amid worries the incoming second Trump administration's policies will increase government borrowing and stoke inflation globally.
"There is growing concern the incoming Trump administration's loose fiscal agenda and potential tariffs will drive up inflation in the medium-to-long term," said Capital.com senior market analyst Kyle Rodda.
"In the short-term, signs of resilient economic activity are stoking the risk of more stubborn price pressures, with the markets dialling back the implied probabilities of a (US) rate cut in December to about 60 per cent," he added.
It resulted in every ASX sector bar one finishing in the red, with the heavyweight banking and mining sectors accounting for the bulk of the losses.
Financial stocks, which make up nearly a third of the main Australian index, tumbled after top lender Commonwealth Bank reported a flat first-quarter profit.
The result comes as some economists push back predictions on the likely start of rate cuts by the RBA on fears of the inflationary impact globally of Trump's proposed trade tariffs.
There was little respite from Australian Bureau of Statistics data showing the annual pace of wage growth slowed to 3.5 per cent in the September quarter, from 4.1 per cent in the preceding three months.
"The RBA will take some comfort from the trend in WPI and may give it a little more confidence that inflation will return to target within a reasonable timeframe," RBC Capital Markets chief economist Su-Lin Ong said, but added that the first 25 basis points rate cut is only priced by August next year, with market pricing now indicating less than 50bps of cuts in total.
CBA shares trimmed early losses but still ended 0.4 per cent lower to $149.62 after the lender reported September quarter cash profit of $2.5 billion.
Shares in Big Four peers NAB and Westpac were down 1.3 per cent and 0.4 per cent respectively, while ANZ lost 4.0 per cent after turning ex-dividend.
The mining sector also bore the brunt of weaker iron ore prices as investors remain unimpressed by the absence of stimulus measures in top steel producer China and fret about the impact of a tariff war with the US.
Mining giants BHP and Rio Tinto were down 0.9 per cent and 3.3 per cent respectively, while shares in beleaguered Mineral Resources slumped more than 7.0 per cent after it flagged the closure of its Bald Hill mine in Western Australia due to a prolonged downturn of lithium prices.
Among other stocks, James Hardie was up nearly 7.0 per cent to $53.69 after the building materials supplier reaffirmed the lower end of its volume guidance, while Aristocrat Leisure was up 2.5 per cent to $66.55 after the gaming giant forecast higher full-year net profit.
Family monitoring app Life360 slumped 7.4 per cent to $22.39 after reporting weaker-than-expected quarterly earnings, while Wisetech shares fell 1.3 per cent after law firm Phi Finney McDonald said it had started court proceedings alleging the tech company breached continuous disclosure obligations over its earnings guidance five years ago.
Meanwhile, the Australian dollar was buying 65.23 US cents, compared with 65.55 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX 200 index finished 62.2 points, or 0.75 per cent lower, at 8,193.40 on Wednesday.
* The broader All Ordinaries was down 64.3 points, or 0.76 per cent, at 8,450.90.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.23 US cents, from 65.55 US cents at Tuesday's ASX close
* 101.22 Japanese yen, from 100.61 Japanese yen.
* 61.55 Euro cents, from 61.58 Euro cents.
* 51.26 British pence, from 51.03 British pence.
* 110.22 NZ cents, from 110.00 NZ cents.
