Local share market closes weaker

AUSTRALIAN stocks fell to a weaker close, dragged down by heavy losses among the resource stocks.

Investors worried about political and financial instability in Europe, including the future of the euro zone, led a flight to safety away from riskier mining stocks.

At the close of trading on Tuesday, the benchmark S&P/ASX200 index was down 30.7 points, or 0.71 per cent, at 4266.3 points, while the broader All Ordinaries index had fallen 35.6 points, or 0.82 per cent, to 4316.3 points.

On the ASX 24, the June share price index futures contract was 24 points lower at 4273 points, on a volume of 27,000 contracts.

The losses in Australia followed falls of about two per cent in European markets overnight and one per cent in the United States.

"Usually if that happens it's quite unlikely we go in the opposite direction," Commsec market analyst Steve Daghlian said.

"The mining sector and energy sector held the market back significantly.

"Added together, those sectors are one-third of the market and have a quite significant impact on what we actually see take place overall."

Falls among resource stocks were compounded by base metal prices falling overnight, along with oil trading below $US95 a barrel.

BHP Billiton hit an almost three-year low during the day before recovering to close down 60 cents at $33.86, Rio Tinto lost 69 cents to $60.31 and iron ore miner Fortescue Metals plunged 24 cents to a three-month low at $5.10.

Australia's largest listed oil and gas play, Woodside Petroleum, shed 69 cents to $32.80 and Santos retreated 14 cents to $12.55.

CMC Markets sales trader Ben Taylor said the weaker market would provide buying opportunities in the next few months but now was not the time to jump in head first.

Defensive stocks, those companies not so significantly affected by economic cycles, were the best performers.

Telstra was up seven cents at $3.71, Coles owner Wesfarmers gave up early gains to be flat at $30.80 and Woolworths was 24 cents higher at $27.21.

Coca-Cola Amatil, which on Tuesday forecast a four to five per cent rise in its first half profit, was 14 cents higher at $12.87.

Clothing maker Pacific Brands was down 3.5 cents at 58.5 cents and said there would be no takeover offer for the company after discussions with potential suitors failed to reach a deal.

Australia's largest goldminer Newcrest Mining lost 78 cents to $25.87.

The price of gold in Sydney was $US1556.49 per fine ounce, down $US20.86 on Monday's close at $US1577.35.

All eyes were expected to be on Europe overnight as Greece tries to put together an emergency government and decides whether to repay a maturing 436 million euros ($A564 million) bond.

National turnover was 2.12 billion shares worth $5.23 billion with 238 stocks gaining value, 834 down and 365 unchanged.