The Australian share market closed sharply lower as investors fretted over Standard & Poor’s (S&P) downgrade on its outlook for US sovereign debt.

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Stocks fell across the board. The benchmark S&P/ASX200 index fell 68.6 points, or 1.41 per cent, to 4,793.3, while the broader All Ordinaries index lost 71.1 points, or 1.44 per cent, at 4,874.3. On the ASX 24, the June share price index futures contract was 72 points lower at 4,795 points, with 39,853 contracts traded.

The local bourse followed US and European markets downwards after S&P reduced its outlook on the US long-term credit rating from “stable” to “negative” and gave the US government until 2013 to act or face losing its coveted triple A rating.

City Index chief market analyst Peter Esho said local investors probably over-reacted to the S&P outlook downgrade given a lack of domestic corporate news ahead of the Easter holiday break.

“In the absence of really good news, the market looks for excuses and this (the S&P downgrade) is potentially an excuse,” Mr Esho said.

“I don’t think that anyone who woke up to that news found it a complete surprise.” Mr Esho said that it was more likely that S&P would not end up revising the US’s triple A rating. “There’s still a two-thirds chance that they (S&P) won’t do anything. It is definitely an over-reaction (by the market),” he said.

On the Australian market, oil and gas producer Woodside Petroleum fell 72 cents to $46.05.

Woodside is battling to meet the start-up date for its Pluto liquefied natural gas (LNG) project after cyclone-related weather delays in Western Australia cut its March quarter production by 12 per cent.

Gold miner Newcrest Mining descended 32 cents to $40.80 as it downgraded full year production guidance due to extreme wet weather on the east coast of Australian and political unrest in Africa’s Ivory Coast.

The gold price in Sydney closed at $US1492.17 per fine ounce, up $US5.27 from $US1486.80 on Monday.

National carrier Qantas Airways was off one cent at $2.11 as it said it would charge a fuel surcharge on frequent flyer redemption seats as part of another round of air fare increases driven by rising fuel prices.

Independent professional trustee The Trust Company lifted 10 cents to $6.50 after it posted a three per cent lift in annual profit but warned that the lack of non-recurring revenue in 2011/12 may constrain earnings.

Global miner BHP Billiton retreated 82 cents to $46.67 and Rio Tinto dumped $1.90 to $82.10.

In the banking sector, National Australia Bank shed 29 cents to $26.00, ANZ lost 33 cents at $23.40, Westpac declined 37 cents to $24.58 and Commonwealth Bank backtracked 52 cents to $52.01.

National turnover was 2.39 billion shares, worth $5.28 billion, with 921 stocks down, 249 stocks up and 334 unchanged.

On Wall Street overnight, the Dow Jones Industrial Average index fell 140.24 points, or 1.14 per cent, to 12,201.59 points.