THE share market closed 1 per cent lower as finance and resource stocks weighed on the bourse, dealers said.
The benchmark S&P/ASX200 shed 33.8 points to 3442.8, while the broader All Ordinaries was down 30.2 points at 3394.8.
The share market perked up in afternoon trading but still closed almost 1 per cent weaker, largely on anxiety over the health of overseas banks.
At the 16.15pm (AEDT) close, the benchmark S&P/ASX200 index had fallen 33.8 points, or 0.97 per cent, to 3442.8.
The broader All Ordinaries index had declined 30.2 points, or 0.88 per cent, to 3394.8.
BHP Billiton's announcement that it would cut production and slash thousands of jobs in Australia and overseas because of a slowing economy helped push the market lower.
Mr Taylor said mining analysts had been largely expecting the news that BHP would have to make cut-backs.
"The mood of the market today has been dominated by the UK banks and lower base metal prices," Mr Taylor said.
BHP Billiton dropped 29 cents to $28.66 and rival miner Rio Tinto, which has already announced job cuts, dumped 74 cents to $37.25.
Banks also fell. Investors already nervous about the state of US banks have been rattled by the Royal Bank of Scotland's forecast that its losses for 2008 could top $61.64 billion, making it the biggest loss in British history.
"The banking sector was hit pretty hard yesterday and today because of the run-off effects of what's happening in the UK," CMC Markets analyst David Taylor said.
Australian banks were more regulated and in better health than many offshore banks, but the market was still nervous local banks may feel some effect from the woes of their offshore counterparts, he said.
NAB fell 78 cents to $17.61, Commonwealth Bank surrendered 74 cents to $25.61, ANZ retreated 53 cents to $13.17 and Westpac sagged 48 cents to $15.02.
Mineral sands miner Iluka Resources was off 15 cents at $4.45 as it reported an increase in total mineral sales in 2008 despite posting a fall in production.
Oil and gas producer Woodside Petroleum was up 98 cents at $34.41 and Santos gained 21 cents at $14.21.
On Wall Street overnight, the inauguration of Barack Obama as US president did not dispel the gloom surrounding the banking industry, and the Dow Jones Industrial Average index fell 4.01 per cent to 7949.09.
On the Sydney Futures Exchange, the March share price index futures contract was down 42 points at 3,420 on a volume of 28,390 contracts, according to preliminary calculations.
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