Australian shares slumped the most in over three weeks on Wednesday, as rate-sensitive sectors such as banks, technology, and real estate took a beating due to upbeat U.S. economic data that prompted investors to dial back their rate-cut bets.

The S&P/ASX 200 index fell 1.3% to finish the day at 7,782.500 points. The benchmark ended 0.1% lower on Tuesday after it scaled a record high earlier that day.

Upbeat manufacturing and labour market data from the United States revived fears over the quantum of the U.S. Federal Reserve easing this year, also influencing domestic investors' rate cut expectations from the Reserve Bank of Australia (RBA).

According to the RBA rate tracker monitored by the Australian bourse operator, market expectations of a rate cut in May have reduced to 8% on Tuesday from 18% two weeks earlier.

"The RBA wants to cut rates as the property bubble is looking shaky but they cannot move ahead of Fed and risk currency devaluation raising inflation," Mathan Somasundaram, CEO at Deep Data Analytics said.

Domestic banks and property sectors, which benefited from lower rates, are now pulling back on rate cut delays, Somasundaram said, adding that retail, consumer spending and asset managers are also likely to see similar downside risk in April.

Heavyweight banking sector, which comprises a quarter of the benchmark, fell 1.3% to mark its worst day in nearly three weeks.

The "Big Four" lenders lost between 1.2% and 1.9%, with top lender Commonwealth Bank of Australia declining almost 2%.

Real estate stocks lost 3.2%, with shopping centre operator Scentre Group and integrated property group Goodman Group losing 3.4% and 2.6%, respectively.

Heavyweight miners shed 0.7%, while information technology stocks and healthcare firms lost 4% and 1.5%, respectively.

In New Zealand, the benchmark S&P/NZX 50 index lost 0.5% to finish the session at 12,040.4900 points. (Reporting by Rajasik Mukherjee in Bengaluru; Editing by Janane Venkatraman )