The benchmark S&P/ASX 200 slid 1% or 44.8 points to 4087.6 points and the All Ordinaries fell 43.1 points to 4133.7 points.

In overseas news, HSBC Flash Purchasing Managers Index revealed that China’s factory sector contracted in June, representing a consecutive seventh month decline.

“China’s manufacturing sector continued to slow in June, though the pace of slowdown seems to be slowing,” HSBC economist Hu Qingbin said in a statement today.

“With external headwinds remaining strong, exports are likely to decelerate in the coming months.”

In local economic news, the Reserve Bank of Australia released its bulletin for the June quarter, which was slightly more upbeat on China.

“The slowdown in Chinese growth from 10% to a mere 8% is a major talking point and some see it as portending a major crash,” the RBA said.

“But some slowing was required to reduce inflation and therefore put growth on a more sustainable path.”

Meanwhile, a majority of mining stocks lost ground, with Rio Tinto dropping 1.4% to $A56.89 while shares in Fortescue Metals also fell, dropping 2.4% to $4.79.

Shares in junior Octagonal Resources soared 20% to 15c after providing a company update.

Highlands Pacific entered into a trading halt regarding a capital raising while Goldminex Resources requested a trading halt pending the announcement of a corporate review and a potential board restructure.

Ferrowest also entered into a trading halt pending news of an investor agreement.

The Australian dollar was still trading above the greenback but had lost ground. At 4:30pm AEST, it was trading at $US1.016.