Index tumbles through 5000 barrier

The Australian share market closed at its lowest point in nearly two years today as big mining stocks fell and the rising oil price fanned fears of an economic slowdown.

The decline wiped $28.7 billion off the value of the broader market.

The benchmark S&P/ASX200 index had lost 96.5 points, or 1.89%, to 4998.3.

The index closed under 5000 points for the first time since September 2006, when it ended at 4983.2.

"There's blood on the floor and on the walls,'' Austock senior client adviser Michael Heffernan said. "Resources stocks were carved up mercilessly.''

The S&P/ASX200 also recorded its biggest one-day fall since June 12, when the index lost 2.3%.

The broader All Ordinaries fell 117.6 points, or 2.26%, to 5094.0, its lowest close since September 2006, when it ended at 4948.4

The S&P/ASX200 touched an intraday low of 4969.1 while the All Ords went as low as 5069.4.

The September share price index futures contract had shed 94 points to 5000 on a total volume of 27,838 contracts, according to preliminary calculations.

Mr Heffernan said the share market fall would have been more severe if it were not for a positive performance from the major banks.

He said coal stocks, which had enjoyed a stellar run, had suffered from a drop in the spot price of coal and profit-taking by investors.

In the resources sector, BHP Billiton lost $3.07, or 7.16%, to $39.82, and Rio Tinto dumped $10.36, or 7.83%, to $121.95.

MacArthur Coal fell $1.26 to $15.15, Gloucester Coal retreated $1.58 to $10.60, and Centennial Coal lost 78 cents at $4.99.

But among the major banks, NAB rose 46 cents to $26.48, Commonwealth Bank added $1.14 to $41.35, ANZ was up 41 cents at $18.71, and Westpac gained 39 cents to $19.69.

On Wall Street overnight, the Dow Jones industrial average tumbled 166.75 points, or 1.46%, to 11,215.51.

US stocks were pummelled on concerns that record high oil prices would take a toll on the US economy and hurt company profits.

The US market was also spooked by a report from broker Merrill Lynch warning that it was "not impossible'' that vehicle manufacturer General Motors could fall into bankruptcy.

In the local gold sector, Newcrest fell $1.01 to $30.00 after closing out its gold hedge book at a cost of $1.67 billion.

Newmont was off 40 cents at $5.20, and Lihir lost 10 cents at $3.22.

Oxiana weakened 11 cents to $2.23 after saying it would sell up to 25% of its Martabe gold project in Sumatra to PT Antam.

The price of gold in Sydney at 4.26pm was $US942.80 per fine ounce, up $US1.35 on yesterday's close of $US941.45.

Among media stocks, Ten Network was up 8.5 cents to $1.44 on its plan to buy back 10% of its issued stock over the next years to boost its share price.

News Corp dipped 10 cents to $15.40, and its non-voting stock fell 13 cents to $15.13.

Consolidated Media eased 2 cents to $3.17, and Fairfax was off 6 cents to $2.70.

In the retail sector, Wesfarmers, which owns Coles, fell $1.64 to $32.90 after it said chairman Trevor Eastwood would step down in November.

Woolworths lost 25 cents to $23.10.

Among the telcos, Telstra put on 7 cents at $4.28, and Optus-owner Singapore Telecommunications lost 3 cents at $2.69.

Among other stocks, forestry company Gunns added 2cents to $2.40 after it said it was negotiating terms with a banking syndicate to finance its $2 billion pulp mill at Bell Bay in Tasmania.

The top-traded stock by volume was gold miner Oxiana, with 60.4 million shares worth $136.97 million changing hands.

Preliminary national turnover was 1.67 billion shares worth $7.41 billion, with 890 stocks down, 346 up and 277 unchanged.