Heightened concerns over local economic conditions and the timing of an interest hike in the US spooked the Australian stockmarket on Monday, with investors crunching the value of leading blue chip stocks.

The benchmark S&P/ASX 200 index posted its second biggest fall in 2015, sliding 1.3 per cent to close at 5821 points.

Further slides are expected when trading resumes on Tuesday morning after futures traders priced in the likelihood of more losses.

• Inside the Treasurer’s bearded-lady economics
• Low rates helping the economy: RBA
• GDP growth disappoints again 

Many widely-held stocks were caught up in the sell-off, with Telstra (down 2.2 per cent to $6.14), Qantas (down 2.5 per cent to $2.80), Westfield (down 5 per cent to $9.36) and Newcrest Mining ( down 5 per cent to $12.65) among the hardest hit.

Infrastructure and utility companies also tumbled led by toll road operator Transurban, which slumped 3.5 per cent to $9.02.

Analysts attributed the big fall to the release of strong job growth figures in the US, which is expected to increase pressure on the Federal Reserve to raise interest rates earlier than August.

“The prospect of the Fed raising rates sooner rather than later remained the central catalyst for investors and resulted in the market suffering the worst loss since the first week of January,” Commonwealth Securities senior analyst Tom Piotrovski said.

Other leading analysts, including Goldman Sachs head of strategy Matthew Ross, warned that the risk of the Australian economy entering a recession was increasing.

In a research report published on Monday, Mr Ross said the chance of a local recession had risen to 33 per cent and that forecasts of unemployment peaking at 6.75 per cent might be conservative.

Mr Ross is one of the country’s most influential stock advisers and his opinion is highly sought by big investors, including superannuation funds.

The worsening economic outlook has caused Mr Ross to downgrade his recommendation on local bank stocks.

He is now advising investors to reduce their holdings of bank shares on concerns that worse-than-expected unemployment will lead to more borrower defaults.

Historically, bank profits tend to fall during recessions when bad debt losses tend to blow out as lenders fail to meet repayments.

Mr Ross also noted that bank earnings could be undermined by the introduction later this year of new capital controls by the Australian Prudential Regulation Authority.

Under the proposed changes, the regulator is considering increasing the amount of capital banks are required to put aside when they lend to home borrowers.

All ASX-listed banks lost ground on Monday, with Macquarie Bank (down 2.2 to $73.70) and National Australia Bank (down 1 per cent to $37.63) posting the biggest losses.