The Australian share market has closed lower with mining and energy stocks losing ground in thin and directionless trade after commodity markets took a hit overnight. The benchmark S&P/ASX200 index dropped 27.6 points, or 0.58 per cent, to 4714.9 points, while the broader All Ordinaries index fell 28.6 points, or 0.59 per cent, to 4820.9 points.

On the ASX 24, the March share price index futures contract was 27 points lower at 4709 on volume of 20,906 contracts. Shares in BHP Billiton Ltd fell 44 cents to $45.01 while rival Rio Tinto was down 73 cents to $85.07. Before the market opened, Rio Tinto Ltd announced it had completed the sale of a 61 per cent interest in Alcan Engineered Products to a number of investment funds.

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Energy stocks also took a hit after oil prices dropped from a 26 month high on Tuesday, as investors wondered if the price of crude had climbed too high, too fast. Woodside Petroleum fell 45 cents, or 1.05 per cent, to $42.38 and Santos Ltd lost 13 cents to $13.06. Macarthur Coal Ltd downgraded its first half profit guidance, after extending its force majeure declaration due to flooding in Queensland. MacArthur shares were 22 cents lower at $12.65.

Insurers affected by the Queensland floods recovered lost ground to rank among the day's best performers after they were sold off on Tuesday. Suncorp Group Ltd gained 15 cents, or 1.8 per cent, to $8.50, while QBE Insurance Group added eight cents to $17.85. Among the major retail banks, Commonwealth fell 58 cents to $49.89, NAB lost 17 cents to $23.67, ANZ dropped eight cents to $23.18 and Westpac fell four cents to $22.08.

With the price of gold down, producer Newcrest Mining dropped 1.65 per cent to $39.84. Gold dived more than two per cent on Tuesday, its biggest one day loss since early November, as signs of an improving economic outlook diminished safe haven buying and a profit taking commodities rout dragged prices off highs. The spot price of gold was $1,382.40 per fine ounce, down $34.10 from Tuesday's closing price of $1,416.50 per ounce. Gold explorer Octagonal Resources Ltd fell two cents after its sharemarket debut to 23 cents.

Retailers were lower, amid a public backlash against a campaign by some major outlets to press the government to apply GST to goods bought online. Myer lost 11 cents to $3.41 and Harvey Norman fell two cents to $2.90. Coles owner Wesfarmers fell 67 cents, or 2.11 per cent, to $31.15 and Woolworths dipped 17 cents to $26.46. In the S&P/ASX 200 index, the strongest performing stock was Murchison Metals Ltd, which rose 5.02 per cent to $1.36, while Lynas Corporation lost the most ground, down 6.09 per cent to $2.16. Overall turnover was 2.6 billion shares worth $4.27 billion, with 432 stocks up, 702 down and 376 unchanged.

The Australian dollar pulled back sharply for the second straight session on Wednesday as a swift deterioration in metals prices combined with damaging floods in the Australian state of Queensland weighed on the currency. As huge flooding in the resources rich state of Queensland continues to portend a big hit to the country's economic output, given the disruption to coal exports and crop production, the Australian dollar has pulled back from a six month long surge.

Also hurting the currency overnight was a massive fall in both gold and copper prices. The flood damage will likely kill the need for any near-term rate hike by the Reserve Bank of Australia, while also damaging the country's most robust sector: mining. The Australian dollar traded at $1.0025, down from $1.0107 late Tuesday. Against the Japanese yen, the Australian dollar traded at 82.135, down from 82.895.

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