At 12.00pm (AEDT), the benchmark S&P/ASX200 was down 11.8 points, or 0.33 per cent, to 3592.5, while the broader All Ordinaries lost 16.2 points, or 0.46 per cent, to 3538.
ABN AMRO Morgans' director of equities Bill Chatterton said the local market was performing well given Wall Street's 3.7 per cent fall overnight and a modest retreat in local banking stocks.
"The big four banks were up 35 per cent in the last month and were due for a (retreat),'' he said, adding that the market was not responding as negatively to offshore bank bailouts.
On Sunday, Spain's government and the Bank of Spain began to rescue major Spanish lender Caja Castilla La Mancha, the first Spanish bank to seek help since 1993.
Financials were mixed.
Commonwealth Bank of Australia firmed 2 cents, or 0.09 per cent, to $34.73, the only major Australian lender to gain ground by noon.
ANZ Banking Group lost 7 cents, or 0.44 per cent, to $15.78, while NAB dropped 47 cents, or 2.26 per cent, to $20.32, and Westpac Banking Group fell 4 cents, or 0.21 per cent, to $19.16.
Wall Street's fall on the Obama Administration's deadline for US carmakers had a modest impact on the local materials sector, Mr Chatterton said.
Resources were lower.
BHP Billiton lost 37 cents, or 1.14 per cent, to $32.18, while rival Rio Tinto eased 38 cents, or 0.66 per cent, to $56.82.
On the Sydney Futures Exchange, the June share price index contract was trading 12 points lower at 3604 on volume of 14,557 contracts.
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