Nervous investors have sold down US stocks after surviving last week's turbulence, amid continued worries over the potential broader impact of China's slowdown.
The Australian share market has closed 1 per cent lower as investors fretted over the possibility the US Federal Reserve could soon raise interest rates.
US stocks have posted big gains for the second straight session as strong American economic data extended a global rally that began with a surge in beaten-down Chinese equities.
The Australian share market is almost 1.5 per cent higher, following Wall Street's three per cent gains, a sign traders are shrugging off recent volatility.
Australian shares have defied predictions of a second straight day of carnage as the big banks helped the domestic market recovered its opening losses.
US stocks have finished sharply lower but far above the session's floor following a bruising day in global financial markets sparked by mounting worries over the Chinese economy.
More than $70 billion has been wiped from the Australian share market as fears about China's economy sparked its heaviest fall in six and a half years.
The Australian share market has plunged at the start of trade, with losses being felt across the board from banks to resources stock as uncertainty grips global markets.