The Australian share market slumped more than 1 per cent on Tuesday, trimming yesterday's increases as resource stocks and major banks slumped on ongoing uncertainty about the US economy.

At 1615 AEST, the benchmark S&P/ASX200 index closed 48.5 points or 1.1 per cent lower at 4404.2. The broader All Ordinaries Index, meanwhile, lost 44.3 points or 1 per cent to 4438.8.

Among the sectors, energy stocks dropped 1.6 per cent. Financials and materials both shed 1.1 per cent. Investors seeking for a safe haven went for gold, which led to the yellow metals gain of 2.3 per cent.

Promising retail sales and building data failed to inspire the market. Despite the relative strength of the Australian economy, the local market was following Wall Street's lead and fears about the fragile US economy, according to analysts.

"We are going to get a lot of sporadic spikes and falls because it is hard to get consistency through on the (economic) numbers," said Paterson Securities dealer Martin Angel.

IG Markets research analyst Ben Potter said from Melbourne, ''It has been a pretty weak day, although we are outperforming the US lead, which is one positive."

Wall Street slumped about 1.5 per cent in the lightest volume of 2010 overnight as fears about the pace of economic recovery overshadowed data indicating an increase in consumer spending and income.

Compounding fears, Japan's Nikkei-225 index fell more than 3.5 per cent as worries over the strength of the yen continued.

The resource giants pulled down the Australian bourse, with BHP Billiton finishing 82 cents or 2.2 per cent lower at $37.05 and Rio Tinto slumping to $70.09 after shedding 92 cents.

The four big banks followed the downward trend. The worst performer was Westpac, which lost 63 cents, or 2.8 per cent, at $21.70.

ANZ ended 36 cents or 1.6 per cent lower at $22.59, while Commonwealth Bank fell 25 cents or 0.5 per cent at $50.30. National Australia Bank gave in 35 cents or 1.5 per cent at $23.20.