The Aussie market began the new trading week where it left off last week - plummeting due to fears over sovereign debt and the health, or lack thereof, of the US economy.

Triggering today's plunge was S&P's downgrade of US debt, which has heightened concerns the world's largest economy will slip back into recession.

Resource stocks again bore the brunt of the selling; BHP was down 4% whilst Rio Tinto fell 4.7% following its bid for Coal & Allied.

NAB was the worst performer among the big four, dropping 4%. ANZ gave up 3.1%.

Soaring bullion prices failed to lift the local gold miners; Newcrest was off 1% and Medusa Mining backtracked 4.8%.

The ASX 200 slumped 119 points (-2.9%), closing at 3986.

The market is now at trading at its lowest level since July 2009.