At 12noon (AEDT), the benchmark S&P/ASX200 was down 64.7 points, or 1.7 per cent, at 3744.5, while the broader All Ordinaries lost 56.8 points, or 1.51 per cent, to 3711.5.
On the Sydney Futures Exchange, the December share price index futures contract was 43 points lower at 3748 on a volume of 16,561 contracts.
Intersuisse director of equities, Andrew Sekely, said financials were leading the way down.
"With the miners up, obviously something had to be down and there you are seeing a direct response to what happened overnight on Wall Street,'' Mr Sekely said.
"The market in the States wasn't all that bad during most of the day and then, just as we got to the end of the day's trading, there was this big dump.
"That's what is affecting the financials.''
At 12.14pm (AEDT), ANZ was 78 cents lower, or 4.59 per cent, at $16.22, National Australia Bank had fallen $1.06, or 4.43 per cent, to $22.86 and Commonwealth Bank dropped 72 cents, or 1.8 per cent, to $39.30.
Westpac was 29 cents lower, or 1.45 per cent, to $19.70 and its takeover target St George Bank shed 44 cents, or 1.67 per cent, to $25.95.
Overnight, Wall Street ended a highly volatile session with a big last-minute loss as worries about a protracted downturn in the economy and tight credit markets erased the bulk of the financial sector's gains.
The Dow Jones Industrial Average dropped 203.18 points, or 2.42 per cent, to close at 8175.77 after being up as much as 200 points during the day. The Nasdaq composite lost 46.13 points, or 2.97 per cent, to 1505.90 and the broad-market Standard & Poor's 500 index fell 27.85 points, or 3.18 per cent, to 848.92.
Mr Sekely said the Australian bourse was faring relatively well, with both BHP Billiton and Rio Tinto in positive territory.
"The weak Australian dollar is giving them a hand and, by and large, metal prices were quite strong overnight'' Mr Sekely said.
"Although the market is down, it's probably performing a little bit better than one could have expected.''
BHP shares were 26 cents higher, or 1.06 per cent, at $24.86, while rival Rio was up $1.50, or 2.32 per cent, at $66.15.
Oil prices sank to 17-month lows during trade overnight amid rising worries that a global recession will sap energy demand, particularly in Asia where markets have plunged to 20-year lows.
New York's main contract, light, sweet crude for December delivery, fell 93 cents to close at $US63.22 a barrel, after falling as low as $US61.30 during trade.
Locally, Woodside Petroleum fell $1.43, or 3.88 per cent, to $35.47, Oil Search gained five cents, or 1.59 per cent, to $3.20 and Santos dropped 63 cents, or 5.36 per cent, to $11.12.
At 12.26pm AEDT, spot gold was trading in Sydney at $US731.10 an ounce, up $US4.45 on yesterday's close of $US726.65.
Among gold miners, Lihir Gold says it has achieved record gold production of 250,000 ounces in the third quarter of fiscal 2008 and predicts further growth in the coming quarter. Lihir Gold gained 6.5 cents, or 4.14 per cent, to $1.635.
Newcrest Mining was 65 cents lower, or 3.63 per cent, at $17.25 and Newmont Mining was down 28 cents, or 7.41 per cent, to $3.50.
In company news, UK-based BG Group, which launched a failed $13.8 billion bid for Origin Energy, has made a $4.8 billion takeover of Queensland Gas Company. Queensland Gas shares were $2.55 higher, or 79.69 per cent, at $5.75.
Funds and wealth manager Perpetual says its earnings outlook is in line with consensus but cautions that market volatility could still have an impact. Perpetual shares were $1.50 lower, or 3.8 per cent, at $38.00.
Wealth manager BT Investment Management has reported a $14.3 million profit from its first year of operation, saying a strong balance sheet positions it to take advantage of growth opportunities in current dislocated markets. BT shares were down nine cents, or 3.49 per cent, at $2.49.
Casinos operator Crown says recent trading at its Australian businesses continues to be solid and it's confident a casinos industry in Macau is sustainable. Crown shares were 48 cents lower, or 7.41 per cent, at $6.00.
Agribusiness Futuris expects its 2008/09 underlying net profit to be at the lower end of market expectations. Futuris shares were down nine cents, or 7.96, at $1.04
Regional pay television operator Austar United Communications has lifted third quarter earnings by 14 per cent and says it remains on track to meet its calendar 2008 guidance. Austar shares were four cents higher, or 4.44 per cent, at 94 cents.
Surf, snow and streetwear retailer Billabong International Ltd has upgraded its guidance, as the exporter reaps the benefits of a falling Australian dollar. Billabong shares were five cents higher, or 0.46 per cent, at $11.
Retailer Harvey Norman says sales for the month to October 26 are down 3.6 per cent on the same period last year. Harvey Norman shares four cents lower, or 1.54 per cent, at $2.55.
At 12.34pm AEDT, the most traded stock by volume was Queensland Gas, with 54.59 million units changing hands worth $313.93 million. Market turnover was 619.37 million shares, valued at $1.77 billion, with 252 stocks up, 608 down and 236 unchanged.
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