KEY POINTS:
The Australian share market closed in negative territory, defying firmer commodity prices and a positive lead from the US overnight.
Wall Street chalked up gains due to widespread expectations that interest rates will be cut for the second time in a two weeks when the board of the US Federal Reserve meets tomorrow night (Australian time).
Locally, the benchmark S&P/ASX200 index finished down 143.8 points, or 2.45 per cent, to 5,716.5 and the All Ordinaries had fallen 131.8 points, or 2.24 per cent, to 5,754.5.
On the Sydney Futures Exchange at 1619 AEDT, the March share price index contract was down 121 points to 5,692 on 34,063 contracts.
MF Global senior trader Anthony Anderson said trading volumes were thin as fears for the US economy continued.
"The futures were indicating the local market would have a good opening, up 50 points or so, and within half an hour it was down 50 points," Mr Anderson said.
"It's hard to say what the cause of the weakness is other than nervousness about the US.
"Asia was very weak yesterday but it's better today.
"The banks were particularly weak, as were resources despite stronger commodity prices overnight.
"Things should be looking better than they are, but it emphasises the nervousness around and strong selling pressure.
"It does seem a little bit overdone."
He said an expected 50-basis points interest rate cut in the US on Wednesday had already been factored into the market.
Excluding aluminium, base metal prices on the London Metal Exchange improved.
Regardless, the big diversified miners closed down. BHP Billiton had dipped A$1.10, or 2.99 per cent, to A$35.70 and takeover target Rio Tinto had shed A$4.93, or 4.16 per cent, to A$113.57.
The Dow Jones industrial average rose 176.72 points, or 1.45 per cent, to 12,383.89, the Standard & Poor's 500 Index leapt 23.35 points, or 1.75 per cent, at 1,353.96 and the Nasdaq Composite Index closed up 23.71 points, or 1.02 per cent, at 2,349.91.
The big banks were weaker. ANZ Bank was down A$1.04 to A$26.45, Commonwealth Bank was A$2.00 softer at A$51.71, National Australia Bank was A$1.06 lower at A$35.43 and Westpac had dropped 34 cents at A$26.25.
The nation's fifth largest bank, St George, dropped A$1.02 to A$29.98.
Despite oil prices rising to USA$91.04 a barrel, energy stocks fell. Woodside Petroleum lost A$1.34 to A$45.85 and Santos dipped 63 cents to A$12.18.
Papua New Guinea's largest oil and gas producer Oil Search reported a three per cent fall in fourth quarter production, due to natural field decline in PNG and a lower contribution from its interests in Egypt.
Oil Search shares finished down 35 cents to A$4.35.
Also, Chinese Iron and Steel Group took a 3.9 per cent stake in Apollo Minerals and is looking to increase its interest to 19.9 per cent.
Apollo's shares finished four cents higher at 33 cents.
Resource investment house Mineral Securities (MinSec) gave the thumbs up to a merger proposal with copper producer CopperCo to create an diversified base and precious metals company with a market value of A$530 million.
Shares in MinSec were steady at A$1.40 while CopperCo's shares were down two cents to 63 cents.
Shares in Allco Finance Group Ltd continued to recover today after the finance house said major shareholder Allco Principals Investments had secured standstill agreements with two margin lenders.
Allco closed 22 cents, or 6.47 per cent, stronger to A$3.62.
In other headlines, China's Sinosteel Corporation increased its stake in takeover target Midwest Corp to 18.7 per cent, following heavy trading in the iron ore company's shares on Friday.
Midwest shares tumbled 29 cents, or 5.75 per cent, to A$4.75.
Troubled shopping centre owner Centro Properties Group opened its books today to interested parties.
Its shares gained 2.5 cents to 65 cents.
In Asian trading today, the spot price of gold hit a record high of US$929.40.
At 1624 AEDT, the spot price of gold in Sydney was US$927.75 per fine ounce, up US$15.50 from Friday's close of US$912.25 per fine ounce.
The gold producers were mixed. Lihir Gold edged down two cents to A$3.76, Newmont Mining gained 20 cents to A$6.14 and Newcrest Mining had lost 90 cents to A$33.75.
Telstra fell 10 cents to A$4.47, its instalment receipts were down nine cents to A$2.91 while Optus owner Singapore Telecom shed six cents to A$2.93.
The retailers were mixed. Woolworths gained 37 cents to A$30.80, Coles owner Wesfarmers was A$1.37 stronger at A$36.63, Harvey Norman was steady at A$6.00 and David Jones jumped six cents to A$4.98.
The most heavily traded stock was Great Gold Mines NL with 261.09 million shares changing hands, worth A$11.43 million.
Its shares were 0.1 of a cent, or 2.63 per cent, stronger at 3.9 cents.
Preliminary market turnover was 1.84 billion shares worth A$6.73 billion, with 515 shares up, 723 down and 308 unchanged.
- AAP
