At 12noon (AEDT), the benchmark S&P/ASX200 was down 188.5 points, or 4.08 per cent, at 4430.2, while the broader All Ordinaries had lost 185.2 points, or 4.03 per cent, to 4412.7.
The December share price index futures contract had fallen 253 points at 4435, on a volume of 23,652 contracts.
Macquarie Equities adviser Helen Spencer said the market was "cautious and nervous'' as it awaited news now about interest rate cuts from overseas.
"The market gave up most of yesterday's gains after heavy losses in the US overnight and resources are trading lower,'' Ms Spencer said.
Commonwealth Bank of Australia shares remain in a trading halt following the bank's announcement this morning of its agreement to purchase two local arms of British bank HBOS, retail banker BankWest and wealth manager St Andrew's, for $2.1 billion. CBA last traded at $45.15.
ANZ dropped $1, or 5.51 per cent, to $17.15 and National Australia Bank fell $1.82, or 7 per cent, to $24.18.
Westpac shed $1.15, or 4.94 per cent, to $22.12 and its takeover target St George Bank was off by $1.60, or 5.27 per cent, to $28.76.
Among the miners, BHP Billiton lost $1.86, or 5.87 per cent, to $29.84, while takeover target Rio Tinto declined $5.04, or 5.9 per cent, to $82.73.
In the US overnight, the Dow Jones Industrial Average sank 508.39 points, or 5.11 per cent to a five-year closing low of 9447.11 following a 369-point slide Monday and a global rout.
The tech-heavy Nasdaq plummeted 108.08 points, or 5.80 per cent to 1754.88 and the Standard & Poor's 500 index slid 60.66 points, or 5.74 per cent to 996.23, dropping below a key level of 1000 points and also hitting a five-year low.
In news today, Qantas says the cause of of a mid-air incident involving one of its planes remains speculation, as air safety investigators say there was an ``irregularity'' in the aircraft's onboard computer.
Qantas was down ten cents, or 3.22 per cent, to $3.01, and Virgin Blue was steady at 37 cents.
New York's main contract, light sweet crude for delivery in November, climbed $US2.25 overnight to close at $US90.06 a barrel.
The local energy sector was weaker today, with Woodside Petroleum down $1.87, or 3.97 per cent, at $45.18, Santos dropping $1.01, or 6.03 per cent, to $15.74, and Oil Search shedding 15 cents, or 3.17 per cent, to $4.58.
At 12.12pm AEDT, spot gold was trading in Sydney at $US883.25 an ounce, up $US19.45 on yesterday's close of $US863.80.
In local gold stocks, Newcrest Mining was up 74 cents, or 3.05 per cent, at $24.99, Newmont Mining fell 12 cents, or 2.51 per cent, to $4.67, and Lihir Gold was four cents higher, or 1.7 per cent, at $2.39.
The retailers were lower. Woolworths lost 59 cents to $28.16, David Jones was down eleven cents, or 3.01 per cent, at $3.55, Harvey Norman was two cents lower at $2.91, and Coles owner Wesfarmers fell 66 cents to $26.60.
In media, Fairfax dropped ten cents, or 3.86 per cent, to $2.49, while Consolidated Media lost 12 cents, or 5.33 per cent, to $2.13.
News Corp - the parent company of the publisher of news.com.au - fell 55 cents, or 3.69 per cent, to $14.34, while its non-voting scrip was down by 59 cents, or four per cent, at $14.16.
Telstra lost eight cents, or 2.68 per cent, to $4.30 while Optus-owner Singapore Telecommunications dropped eight cents to $2.91.
At 12.28pm AEDT, the most traded stock by volume was St Barbara, with 22.17 million units changing hands worth $5.44 million. Its stocks fell 0.5 of a cent, or 1.96 per cent, to 25 cents.
Market turnover was 497.11 million shares, valued at $1.53 billion, with 164 stocks up, 754 down and 241 unchanged
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