The ASX 200 was down around 1.4 per cent just before midday, while the All Ordinaries had lost 58 points to 4,589.
Unlike yesterday, where many industries directly exposed to the carbon tax had the biggest falls, today's declines are spread fairly evenly across the broader market.
Only 25 companies on the ASX 200 index were making gains, with two of those surging on takeover offers.
Austar's board has agreed to a $1.52 a share cash bid from Foxtel and Liberty Global, which has seen its shares rise nearly 4 per cent to $1.34.
Macarthur Coal was up 37 per cent to $15.18, reflecting a $15.50 a share (minus the next dividend) bid from global mining giant Peabody.
Citi analyst Craig Sainsbury says the offer will probably equal around $15.26 once the next dividend is deducted, and is unlikely to be bettered by any competitors.
He says Whitehaven looks like one of the next likely takeover targets, and its shares are up 2.3 per cent to $6.24.
Widespread falls
Despite the takeover bright spots, the overall market sentiment is one of economic gloom as European debt concerns again ramp up only weeks after Greece narrowly averted default.
Traders are now turning their attention to the bigger debt-laden states of Italy and Spain, and questioning whether austerity measures will be enough to allow them to meet their sovereign debt obligations.
As has been the case throughout the European debt crisis, Australia's major banks have taken a hit on concerns their wholesale funding costs will rise, particularly if the European situation spirals out of control.
National Australia Bank was down 2.6 per cent to $24.16, ANZ was off 1.9 per cent, CBA down 1.7 per cent, and Westpac had lost 1.6 per cent to $21.25.
The major miners also fell steeply on concerns that a global economic slowdown may cut demand for their commodities.
BHP Billiton and Rio Tinto were both down just under 2 per cent, Fortescue was down 2.3 per cent, while oil and gas producer Woodside had lost just over 1 per cent.
Australia's listed airlines continued to give up the gains they made after Singapore-owned rival Tiger was grounded.
Qantas was off 3.4 per cent to $1.87, while Virgin was down 4.4 per cent to 32.5 cents.
Retailers also generally struggled, with JB Hi-Fi off almost 3 per cent, and Myer and David Jones both falling 1.5 per cent.
Global markets
Australia's decline surpassed Wall Street's 1.2 per cent fall for the Dow Jones Industrial Average last night, but were smaller than some European declines.
Australia's slide is fairly average for the region, with Tokyo's main Nikkei index down 1.5 per cent, while Hong Kong's Hang Seng was 2.2 per cent lower.
Gold was fairly steady at $US1,553 an ounce, while West Texas crude oil was at $US95.15 a barrel. The Australian dollar was sharply lower at 105.85 US cents.
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