At 12noon (AEDT), the benchmark S&P/ASX200 was down 135.3 points, or 2.88 per cent, to 4560.1, while the broader All Ordinaries had fallen 133.3 points, or 2.83 per cent, to 4569.5.
On the Sydney Futures Exchange, the December share price index futures contract lost 165 points to 4590, on volume of 9905 contracts.
EL & C Baillieu director, Richard Morrow, said today's public holiday was contributing to the market slump.
"It really is an odd, illiquid market day ... and often in thin markets you get movements exacerbated by just the lack of buyers and lack of sellers,'' Mr Morrow said.
"The direction's unambiguously down.
"I think buyers are sitting on their hands to a large degree because of the news flow over the weekend, it's hard to judge how the major northern hemisphere markets will react to it.''
On Friday, the US Congress approved the $US700 billion ($906 billion) Wall Street bailout, while overnight Germany said it would guarantee all private bank accounts and negotiated a multi-billion dollar rescue package for troubled lender Hypo Real Estate Holding.
"It's difficult to judge which way it will come back to us tomorrow as half the domestic market doesn't care (today) because they're on holidays,'' Mr Morrow said.
In the financial sector, Commonwealth Bank was down $1.00, or 2.22 per cent, to $44.01, ANZ lost 58 cents, or 3.1 per cent, to $18.13 and National Australia Bank fell $1.13, or 4.32 per cent, to $25.02.
Westpac shed 75 cents, or 3.23 per cent, to $22.46, and its takeover target St George Bank dropped 84 cents, or 2.79 per cent, to $29.30.
On Friday, Wall Street ended its worse week in seven years with another tumble on fears that the government's financial rescue plan may not unblock credit markets and stave off recession.
The Dow fell 157.47, or 1.50 per cent, to 10,325.38. The Standard & Poor's 500 index fell 15.05, or 1.35 per cent, to 1099.23, and the Nasdaq composite index fell 29.33, or 1.48 per cent, to 1947.39.
Mr Morrow said all sectors were suffering today, although there was one notable exception amongst the financials.
"It's pretty bleak out there, but there is one bright spot to the market and that's Suncorp-Metway,'' Mr Morrow said.
At 12.45pm AEDT, Suncorp shares were up 57 cents, or 5.34 per cent, to $11.25, after the banking and insurance company confirmed parties were talking of buying its banking and wealth management operations.
Fellow insurers generally were lower, however.
QBE Insurance Group lost 86 cents, or 3.15 per cent, to $26.47, AMP Limited shed 18 cents, or 2.62 per cent, to $6.70, while AXA Asia Pacific fell 35 cents, or 6.72 per cent, to $4.86.
Among the miners, BHP Billiton lost 62 cents, or 2.04 per cent, to $29.80, while takeover target Rio Tinto declined $3.61, or 4.06 per cent, to $85.30.
Woodside Petroleum was down $1.40, or 2.8 per cent, at $48.61, while Oil Search shed 40 cents, or 7.14 per cent, to $5.20.
Santos, Australia's third biggest oil and gas producer, completed a $300 million buyback of its shares but still couldn't stay in positive territory, losing 19 cents, or 1.08 per cent, to $17.45, after rising as high as $17.85 a quarter hour after trade opened this morning.
The local gold sector was mixed.
Newcrest Mining was down 89 cents, or 3.23 per cent, at $26.70, Newmont Mining gained four cents, or 0.88 per cent, to $4.58, while Lihir Gold was ten cents lower, or 3.8 per cent, at $2.53.
At 12.56pm AEDT, spot gold was trading in Sydney at $US831.15 an ounce, down $US9.70 on yesterday's close of $US840.85.
Consumer staples generally were weaker, with Woolworths down 68 cents, or 2.35 per cent, to $28.22, Coles and Bunnings owner Wesfarmers 87 cents lower, or 3.07 per cent, to $27.48, and Foster's Group losing 15 cents, or 2.52 per cent, to $5.80.
Coca-Cola Amatil bucked the trend, 11 cents higher, or 1.32 per cent, to $8.46.
At 1.03pm AEDT, the most traded stock by volume was Admiralty Resources, with 30.89 million units changing hands worth $1.825 million. Admiralty shares gained 0.3 cents, or 5.45 per cent, to 5.8 cents.
Market turnover was 331.19 million shares, valued at $1.038 billion, with 164 stocks up, 699 down and 254 unchanged.
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