KEY POINTS:
PERTH - The Australian stock market closed down 4.3 per cent, losing about $55 billion in value, as investors fled most sectors after the US Congress voted down a US$700 billion (A$879.78 billion) bailout package for US financial firms.
But the decline was not as bad as expected, with the major indices recovering some early losses after the Federal Government reassured Australians the nation could weather the financial storm in the US.
Heightened expectations that the Australian central bank could to cut official interest rates by half a percentage point next week to support the economy also prevented the market from mirroring a near seven per cent decline in the US market overnight.
The benchmark S&P/ASX200 closed 206.9 points, or 4.3 per cent lower at 4,600.5, while the broader All Ordinaries fell 207.9 points, or 4.3 per cent, to 4,631.3.
It is the biggest one-day fall since January 22 this year, when the S&P/ASX200 index lost 7.05 per cent and the All Ordinaries fell 7.26 per cent.
Australian market had fallen about 5.5 per cent in morning trade, carving roughly $65 billion off its value.
CommSec chief equities economist Craig James said the Australian market, as with others in Asia, had held up pretty well.
"We're seeing some big declines in our banks but nowhere near that seen for financial stocks around the world," Mr James said.
"Our banks are much more solid."
At 1617 AEST, the December share price index futures contract was down by 190 points to 4,659 on volume of 46,727 contracts.
All of the major banks closed weaker. Westpac was down 7.21 per cent, or $1.67, to $21.48, its takeover target St George Bank had nosedived $2.10, or 6.84 per cent, to $28.60, National Australia Bank had shed $1.43, or 5.57 per cent, to $24.26 and ANZ was relatively unscathed, down four cents to $18.75.
The nation's largest lender, Commonwealth Bank, was down $1.25, or 2.85 per cent at $42.62.
Mining giant BHP Billiton had dropped $3.24, or 9.46 per cent, to $31.00, while its takeover target Rio Tinto had lost $11.00, or 11.52 per cent, to $84.50.
The price of light, sweet crude oil retreated by 9.8 per cent to US$96.37 a barrel overnight on the New York Mercantile Exchange, sending local energy stocks lower.
Woodside Petroleum had fallen $3.55, or 6.51 per cent, to $51.00, Santos was off 60 cents, or 3.05 per cent, to $19.10 and Oil Search had given up 13 cents, or 2.27 per cent, to $5.60.
At 1625 AEST, spot gold was trading in Sydney at US$904.60 an ounce, up US$31.20 on yesterday's close of US$873.40.
Local gold stocks were mixed. Newcrest was down 41 cents, or 1.46 per cent, to $27.63, Newmont had inched two cents lower to $4.90 and Lihir Gold had added 10 cents, or 3.7 per cent, to $2.80.
As for media stocks, Fairfax had shed eight cents, or 2.94 per cent, to $2.64, Consolidated Media had dropped six cents, or 2.38 per cent, to $2.46, News Corp gave up 73 cents, or 4.55 per cent, to $15.30 and its non-voting scrip was down $1.02, or 6.49 per cent, to $14.70.
Among the retailers, Woolworths had lost $1.17, or 4.12 per cent, to $27.20, Coles owner Wesfarmers had gained seven cents to $28.48, David Jones had fallen 10 cents, or 2.27 per cent to $4.30 and Harvey Norman was down 41 cents, or 11.71 per cent, to $3.09.
Harvey Norman today said sales in the two months since the end of its 2007/08 financial year had increased by 6.9 per cent against the previous corresponding period.
In other finance news today, ABC Learning Centres chief executive Eddy Groves and his co-founder wife Le Neve Groves will immediately stand down from all board and management positions of the childcare company.
The stock was placed in a trading halt on August 21 and last traded at 54 cents.
Australia's largest health insurer, Medibank Private, says it has a positive outlook for 2009 despite challenges facing the economy and the health insurance sector.
The most traded stock by volume was iron ore miner and mineral explorer Admiralty Resources, with 53.72 million units changing hands worth $2.7 million.
The company's shares had fallen 1.3 cents, or 20 per cent, to 5.2 cents.
Preliminary market turnover was 1.33 billion shares, valued at $5.9 billion, with 227 stocks up, 963 down and 239 unchanged.
The fall in the market today ALSO pushed the major indices down to the worst levels since December 2005.
The S&P/ASX200 reached its lowest level since December 13, 2005, and the all ords hit its lowest since December 20, 2005.
- AAP
