The share market has closed at a two-month low, with big miners and banks tumbling as concerns over US and European economies unsettle local investors.
The All Ordinaries has retreated 0.9 per cent to 4,371, while the ASX 200 gave up 39 points to finish at 4,349.
RBS Morgans analyst Bill Chatterton said heavy falls in the US had dragged the local market lower.
"There's talk of fiscal cliffs and the European situation is taking a lot longer than the optimists were hoping," he said.
"We're dealing with reality, really.
The GFC hangover doesn't just fix itself up in four or five years." BHP Billiton and Rio Tinto gave back 1.6 per cent and gold miner Newcrest dropped 4.5 per cent.
The major banks saw choppy trade but all ended negative territory; Commonwealth, Westpac and ANZ all ended down around two-thirds of a per cent, with NAB almost flat.
There were some bright spots though, as Qantas shares were at one point the strongest gainer on the ASX 200 after the airline announced a share buyback and debt repayment ahead of schedule.
It also forecast a flat profit result for the first half; its shares ended 4 per cent higher.
Retail stocks were in favour after a rare run of good news for the sector in the lead up to Christmas.
Myer notched its second straight quarter of sales growth which it says was driven by fashion and cosmetics.
Meanwhile, the Australian Retailers Association expects a near 4 per cent jump in crucial pre-Christmas sales season this year, up to $41.2 billion.
That is on top of a jump in yesterday.
Myers shares added 6.5 per cent reaching a six-month high while rival David Jones put on 2 per cent.
JB Hi-Fi and Premier Investments rose more than 2 per cent.
The Australian dollar, meanwhile, was buying 103.5 US cents around 5pm (AEDT), down one cent from the same time a day earlier.
It was also buying 81.3 euro cents, 65.3 British pence and 81.2 Japanese yen.
Oil rose overnight on fears of rising tensions in the Middle East; West Texas crude closed up at $US86.50 a barrel, while Tapis added $2 a barrel to $US115.
Spot gold was flat at $US1,724 an ounce.