In early trade, BHP shares rose eight per cent after announcing it had abandoned its multi-billion-dollar takeover bid for rival Rio Tinto due to the turmoil in global financial and commodity markets.
At 12pm (AEDT), the benchmark S&P/ASX200 index was down 13.8 points, or 0.38 per cent, at 3609.6, while the broader All Ordinaries dropped 29.4 points, or 0.82 per cent, to 3546.
On the Sydney Futures Exchange, the December share price index futures contract was up eight points, or 0.22 per cent, at 3627 points on volume of 17,304 contracts.
Intersuisse director of equities Andrew Sekely said the modest gains on Wall St overnight had not been enough to lead the Australian market into positive territory.
"New York was down 100 points and then rallied fairly late, so it's not entirely convincing," Mr Sekely said.
"What we have at the moment is very uncertain times. We're only down eight points (at the time) and it's just reflective of the fact that there's not a great deal of confidence out there on the market."
Mr Sekely said gains in BHP stocks were understandable.
"The fact that they're not continuing in an obviously long drawn-out battle with Rio, in the current climate, is viewed to be positive."
At 12.01pm (AEDT), BHP Billiton had gained $2.06, or 7.86 per cent to $28.28 while Rio Tinto lost $20.26, or 31.71 per cent, to $43.64.
All the major banks were down, with Commonwealth Bank dropping $1.03, or 3.03 per cent to $32.97, NAB down 15 cents, or 0.75 per cent at $19.72, ANZ losing 31 cents, or 2.13 per cent at $14.24 and Westpac down 53 cents, or 2.97 per cent, at $17.30.
In news, Fortescue Metals has suspended the construction of its Cloudbreak to Christmas Creek rail line in the Pilbara region of Western Australia, instructing contractor NRW to "demobilise'' from the site.
At 12.17pm (AEDT), shares in the iron ore miner had dropped ten cents, or 4.88 per cent, to $1.95. NRW shares were down 15.5 cents, or 34.83 per cent, to 29 cents.
Australia's second biggest oil and gas producer, Woodside Petroleum, was down 33 cents at $33.17, Santos had gained one cent at $14.57 and Oil Search had lost 18 cents, or 3.79 per cent, at $4.57.
At 12.19pm AEDT, spot gold in Sydney was trading at $US811.85 an ounce, down $US4.30 on yesterday's local close of $US816.15.
Gold miners all were mixed, with Newcrest Mining down ten cents at $25.35, Newmont Mining adding five cents to $4.84 and Lihir Gold gaining seven cents, or 3.14 per cent, to $2.30.
In other news, upmarket retailer David Jones reaffirmed its profit forecast for fiscal 2009 after reporting a 6.3 per cent fall in first quarter sales. The company said it expects difficult trading conditions for the rest of the year but that its business was well prepared to weather those conditions.
At 12.22pm AEDT, David Jone shares had lost one cent at $2.49.
The other retailers were mixed. Harvey Norman shares were up five cents, or 2.23 per cent, to $2.29, while Woolworths had lost six cents at $24.94 and Coles owner Wesfarmers had dropped 54 cents, or 2.75 per cent, at $19.10.
QBE Insurance Group announced plans to raise $2 billion through a share placement to pay for a number of acquisitions. At 12.28pm AEDT, QBE shares were in a trading halt at $23.
Norfolk Group has reported a 45 per cent drop in profit for the first half of fiscal 2009, and has revised its earnings guidance downwards for the full year. Shares in the electrical contractor were down eight cents, or 20.51 per cent, at 31 cents.
In media, Fairfax dropped ten cents, or 7.75 per cent, to $1.19, News Corp (the parent company of the publisher of news.com.au) was down 12 cents, or 1.08 per cent, at $11.04 and its non-voting scrip was down 14 cents, or 1.31 per cent, at $10.53.
Shares in Seven Network had added ten cents, or 1.82 per cent, to $5.60, while Ten Network gained four cents, or 3.85 per cent, at $1.08.
At 12.33pm AEDT, the most traded stock was Oz Minerals with 39.19 million units traded for a total of $23.42 million. Shares in the miner were down 1.5 cents, or 2.73 per cent, to 53.5 cents.
Market turnover was 539.8 million shares, valued at $2.19 billion, with 344 stocks up, 384 down and 245 unchanged.
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