Bank shares are leading the Australian market lower after bad news in the US financial sector on Friday renewed fears of a further credit crunch.
The benchmark ASX 200 index was trading 2.75 per cent lower at 5,063.5 at 2:02pm (AEDT).
The big four banks were all down between 4 and 7 per cent at 1:42pm (AEDT), with Westpac faring worst, down about 7.5 per cent to $21.29.
Australia's investment banks have been even harder hit, with Macquarie Group down almost 8 per cent and Babcock and Brown down nearly 10 per cent.
The bail-out of US investment bank Bear Stearns by the Federal Reserve on Friday has triggered fears that the global credit crunch is worsening, not improving.
A further deterioration in world credit markets would cause increased finance costs for Australian banks, reducing profit margins and putting upward pressure on interest rates.
Gold miners, such as Newcrest Mining and Lihir Gold, are bucking the downward trend on the back of a surging gold price.
Gold is currently trading at around $US1023 an ounce, up about 2.5 per cent, after hitting a record high of $US1032.7 around 1:00pm (AEDT).
Fears of further US financial turmoil are driving the gold price higher as both a hedge against the weak US dollar and a safer investment than shares.
The Australian dollar has followed the share market lower, falling 2 per cent by 1:54pm (AEDT).
Source: By Australian Broadcasting Corporation
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