The All Ordinaries Index dropped three points to 5,418 and the ASX 200 shed 10 points to 5,371.

Renewed concerns about the time it will take US banks to recover from the credit crisis weighed on the local banking sector, with three out of the four major banks closing lower.

The Commonwealth Bank was down 80 cents to $42.31, ANZ lost 27 cents, while the National Australia Bank closed 1.3 per cent higher.

However, there was today some reassuring words from Reserve Bank Governor Glenn Stevens.

Mr Stevens today told a conference in Sydney that Australian banks were weathering the storm caused by the US subprime crisis.

He also defended the major banks' decisions to raise their variable home loan rates by more than increases in the official cash rate.

In the resources sector, higher oil and metals prices buoyed mining stocks.

BHP Billiton was up 45 cents to $35.76, Rio Tinto gained 2.2 per cent and Woodside Petroleum added 48 cents to $53.47 cents.

In the media sector, television broadcaster Ten Network Holdings says higher revenue helped it record a 17 per cent increase in half-yearly profit.

The company's executive chairman, Nick Falloon, says the television advertising market has held up remarkably well, despite the turmoil in global debt and equity markets.

Ten closed two cents lower to $2.20.

Wheat exporter AWB Limited rose by almost 6 per cent after a lawsuit was dismissed in the US.

About 5:14pm (AEDT) West Texas Crude oil was fetching $US105.83 a barrel and spot gold was worth $US952.40 an ounce.

The Australian dollar was buying 92.12 US cents, 45 British pence, 91 Japanese yen and 58 euro cents.

Source: By Australian Broadcasting Corporation