Updated October 19, 2018 08:54:45

Photo: It's been a volatile month for Wall Street, which experienced another sharp fall overnight. (Reuters: Brendan McDermid)

Australian shares are set to tumble on Friday after the risk appetite of global investors took a dive — once again.

The Australian dollar is steady at 71 US cents, but has risen to 54.5 British pence and 62 Euro cents.

On Wall Street, the Dow Jones index dropped by more than 327 points, or 1.3 per cent, to 25,379.

The benchmark S&P 500 fell by 1.4 per cent to 2,769 — and closed just above its 200-day moving average, a key indicator of long-term price trends.

The Nasdaq slid sharply by 2.1 per cent, dragged down by Apple and other big-name technology stocks.

Since the start of October, the Dow and S&P have lost more than 4 per cent each, while the Nasdaq has dropped by almost 7 per cent.

Wall Street's major indexes pared early losses in morning trading but reversed course to fall further as European markets closed.

Italian bond yields jumped after the European Commission deemed the country's 2019 budget draft to be in breach of European Union rules.

Markets declined further after US Treasury Secretary Steven Mnuchin pulled out of an investor conference in Saudi Arabia as the White House awaited the outcome of investigations into the disappearance of Saudi journalist Jamal Khashoggi.

Mr Mnuchin's decision sparked worries of potential strain in US-Saudi relations, especially if Saudi leaders were found to have been involved in Mr Khashoggi's disappearance.

Investors raised concern that if Saudi Arabia were sanctioned, it could restrict oil supply and prompt a rise in energy prices.

"As soon as the news came out it increased the selling," said Robert Pavlik, chief investment strategist at SlateStone Wealth in New York.

"Anything that has a semblance of the possibility of trouble, people in this environment see it as a much larger problem than it may really be."

Concerns over rising interest rates following Wednesday's release of the Federal Open Market Committee's minutes from its September meeting also pressured Wall Street's major indexes.

US stocks had opened lower as Chinese stocks plummeted overnight.

The Shanghai Composite fell sharply on Thursday, down 3 per cent, sparking fresh worries about the impact of trade tensions on China's economy and global economic growth.

Topics: business-economics-and-finance, markets, stockmarket, currency, australia

First posted October 19, 2018 07:59:39