The benchmark S&P/ASX200 index at midday on Friday was down 87.4 points, or 1.12 per cent, at 7,724.4, while the broader All Ordinaries was down 88.1 points, or 1.09 per cent, to 7995.0.
The ASX200 was also down 1.1 per cent since last Friday's close, having suffered losses every day this week except Monday.
Overnight a US gauge of business activity known as the Purchasing Managers Index, or PMI, came in much stronger than expected, with the monthly readout climbing to its highest level since April 2022.
"These outcomes followed a few months of declines and meaningfully beat our and consensus expectations for a slight further softening in both," JP Morgan analyst Michael Hanson wrote in a client note.
While the report was good news for the US economy, the readout suggests that rate cuts may not be required any time soon to sustain growth, which is unwelcome news for risk assets like equities.
Expectations for a US rate cut in mid-September dropped further following the readout, with the market's pricing putting the odds at roughly 50-50, according to the CME FedWatch tool.
Ten of the ASX's 11 sectors were lower at midday, all except energy, which was up 0.8 per cent.
The consumer discretionary sector was the biggest loser, down 2.1 per cent as Wesfarmers slipped 3.5 per cent and Lottery Corp dropped 2.1 per cent.
All of the Big Four banks were lower with CBA down 2.1 per cent, Westpac and NAB both dropping 1.8 per cent, and ANZ falling 1.4 per cent.
In the heavyweight mining sector, BHP was down 0.2 per cent, Fortescue had dipped 0.9 per cent and Rio Tinto had slid 0.7 per cent.
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