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PERTH - The Australian stock market closed in negative territory, with the banks weighing on the bourse amid renewed but stronger fears of a rise in interest rates soon.

The benchmark S&P/ASX200 index closed 79.2 points lower at 5915.8, while the all ordinaries dropped 70.6 points to 5908.2.

At 1615 AEST on the Sydney Futures Exchange, the June share price index contract dipped 86 points to 5948 on a volume of 19,229 contracts.

Austock Brokers senior client adviser Michael Heffernan said the banks weighed on the market as strong economic data gave rise to fears of an interest rate rise.

"The market was solidly down today ... it is what you call a red letter day, and the banks have been major contributors to the downward trend," he said.

"I think that is largely due to figures on retail sales and building approvals that came out today, which were robust, better than expected and giving fuel to the possibility of interest rate rises.

"But I think the market will get over this one. Even if interest rates do go up. the economy is still in great shape, the figures today were symptomatic of a very strong economy."

The market got off to a poor start following a mixed lead from Wall Street on Friday night.

The Dow Jones Industrial Average gained 5.60 points to finish last week at 12,354.35, the Standard, and Poor's 500 index dropped 1.67 points to 1,420.86 and the Nasdaq put on 3.76 points to 2,421.64.

Locally, the big miners were weaker with BHP Billiton slipping 54 cents lower to A$29.35 and rival Rio Tinto shedding A$1.61 to A$77.20.

The banks were weaker, with the Commonwealth Bank dropping 66 cents to A$49.60, the National Australia Bank shedding 38 cents to A$40.02, ANZ retreating 30 cents to A$29.40 and Westpac tumbling 45 cents to A$25.90.

Veda Advantage picked up 23 cents to A$3.51 after the credit-checking firm recommended shareholders accept a cash offer of A$3.61 per unit from a consortium led by Pacific Equity Partners and Merrill Lynch Global Private Equity.

Diversified property trust GPT Group dipped six cents to A$4.88 after the company launched a A$2 billion wholesale shopping centre fund, as it muscles further into the booming funds management business.

The media sector was mixed. Fairfax gained two cents to A$5.00, News Corp dropped one cent to A$30.39, its non-voting shares put on 11 cents to A$28.67 and the James Packer-led PBL slipped 25 cents lower to A$19.60.

Fairfax said it would sell some of its community newspapers in the Newcastle region after the Australian Competition and Consumer Commission reported it had concerns about a concentration of newspaper ownership in the region because of Fairfax's proposed merger with Rural Press.

Rural Press put on 13 cents to A$13.73.

The energy sector was mixed despite a drop in the oil price.

Santos added 18 cents to A$10.33, Woodside retreated 79 cents to A$38.70 and Oil Search shed 13 cents to A$3.58.

Energy Resources of Australia (ERA) shed A$1.54 to A$26.26 after the uranium miner forecast a significant decrease in production in 2008 after heavy rain at its Ranger mine in the Northern Territory.

The retailers were weaker, with Coles giving up 14 cents to A$16.11, Woolworths tumbling 59 cents to A$26.60, Harvey Norman falling 13 cents to A$4.59 and David Jones edging five cents lower to A$4.50.

The spot price of gold was slightly higher, and at 1622 AEST was trading at US$663.40 an ounce, up US10 cents an ounce on Friday's local close.

The gold miners were weaker. Newcrest shed 46 cents to A$23.33, Newmont gave up eight cents to A$5.16 and Lihir Gold dropped six cents to A$3.20.

Iron ore hopeful Sundance Resources was the most traded stock on the market, with 98.2 million shares changing hands, worth A$14.5 million.

Sundance gained half a cent to 15 cents.

Preliminary market turnover reached 1.43 billion worth A$4.5 billion, with 521 stocks moving up, 687 stocks down and 350 unchanged.

- AAP