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MELBOURNE - The Australian share market fell over two per cent led lower by a sharp drop on Wall Street after weak US economic data.

At 1615 AEST, the benchmark S&P/ASX200 was down 102.4 points, or 2.06 per cent, to 4877.1, while the broader All Ordinaries lost 101.4 points, or 2.01 per cent to 4949.5.

The September share price index futures contract was down 139 points at 1626 AEST to 4862 on volume of 34,324 contracts.

Renewed financial uncertainty hit Australia's major banking stocks, dragging the wider market lower, Austock Securities senior client adviser Michael Heffernan said.

"While the blood's not gushing, it is oozing," he said.

"The banks are down largely because of factors in the US. Commodity prices were not too bad (overnight)."

Commonwealth Bank finished fell $1.31, or 3.05 per cent, to $41.59, Westpac lost 67 cents, or 2.79 per cent, to $2.79, National Australia Bank was off $1.07, or 4.34 per cent, to $23.60, and ANZ fell 66 cents, or 3.9 per cent, to $16.26.

Westpac takeover target St George was down 77 cents to $30.45.

The Australian market is "bouncing along the bottom", Mr Heffernan said.

"We're in about a range of 300 points off the January low."

A spike in US jobless claims, weak retail sales figures and a drop in the price of crude oil led to a plunge on Wall Street of three per cent overnight.

The Dow Jones Industrial Average fell 344.65 points, or 2.99 per cent, to 11,188.23.

The Nasdaq composite slid 74.69 points, or 3.2 per cent, to 2,259.04 and the broad-market Standard & Poor's 500 index shed 38.15 points, or 2.99 per cent, to 1,236.83.

Stock Move Price AMP - 0.230 6.990 ANZ Bank - 0.660 16.260 BHPBilton - 0.110 37.000 CBA - 1.310 41.590 NAB - 1.070 23.600 NewsCorp - 0.720 17.000 Polartech - .105 Rio Tinto - 1.510 110.080 TelstraCp - 0.070 4.270 WestpacBk - 0.670 23.350 Woolwrths - 0.390 27.300

The large miners did not fall as far as financial stocks, with BHP Billiton easing 0.3 per cent, or 11 cents, to $37.00 and its takeover target Rio Tinto down $1.51, or 1.35 per cent, to $110.08.

Rio Tinto said it had approved US$293 million (A$357.9 million) to fund the further expansion of its 58.7 per cent-owned Iron Ore Company of Canada operations.

Oil stocks were weaker after the oil price fell overnight, with Oil Search falling 3.87 per cent, or 21 cents, to $5.21, Santos was 17 cents softer at $17.46 and Woodside Petroleum off 47 cents to $55.98.

At 1655 AEST the spot price of gold was US$795.20 an ounce, down US$11.70 on yesterday's Sydney close of US$806.90 an ounce.

Gold miners were mixed, with Newcrest Mining gaining 63 cents to $21.77 and Lihir Gold eased eight cents to $1.92.

Also making news today, zinc and copper producer Kagara says it has found an intersection of "massive and semi-massive" nickel sulfides at the Lounge Lizard deposit in Western Australia.

Kagara closed nearly six per cent weaker, or 19 cents down, at $2.98.

Retailers also suffered losses, with Harvey Norman easing nine cents to $3.48, upmarket retailer David Jones losing almost three per cent, or 13 cents to $4.22 and Woolworths down 39 cents to $27.30.

The Reject Shop bucked the trend, gaining 14 cents to $11.59.

Among media stocks, both News Corporation and Fairfax Media finished deep in negative territory after investors shaved over four per cent from their share prices.

News Corporation lost 72 cents to $17.00 and Fairfax Media dropped 13 cents to 2.75.

Telecom New Zealand finished steady at $2.57 after it halted its dividend reinvestment plan and on-market share buyback while it evaluates accelerating the delivery of broadband services.

Oz Minerals was the top traded stock, with 62.06 million share changing hands, for a total value of $96.3 million. Oz Minerals shares finished down 12 cents, or 7.34 per cent, to $1.51.

Preliminary national turnover reached 1.35 billion, worth a total of $5.7 billion, with 316 stocks moving up, 770 moving down and 306 unchanged.