Australian share closed sharply lower on concerns the US government may default if an agreement cannot be reached on raising its debt ceiling. Talks between US President Barack Obama and Congress on Sunday failed to produce an agreement, before the August 2 deadline. On the Australian bourse, the benchmark S&P/ASX200 index was down 72.5 points, or 1.58 per cent, at 4,530.4, while the broader All Ordinaries index was down 70.3 points, or 1.5 per cent, at 4,603.8.

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On the ASX 24, the September share price index futures contract was 82 points weaker at 4,505, with 35,879 contracts traded. All three global ratings agencies have threatened to cut the US's triple A credit rating if an agreement is not reached. Japan's Nikkei fell 0.85 per cent and Hong Kong's Hang Seng lost 0.86 per cent on similar concerns.

Newcrest Mining was the best performer and one of a handful of stocks to make gains on Monday, as the gold price climbed. Newcrest firmed 36 cents, or 0.82 per cent, to $40.38. The spot price of gold in Sydney was trading at $1614.30 per fine ounce, up $25.56 from Friday's local close at $1,588.74. Among the banks, National Australia Bank was down 59 cents, or 2.34 per cent, at $24.63, Commonwealth Bank lost 98 cents, or 1.94 per cent to $49.54. ANZ fell 42 cents, or 1.93 per cent, to $21.31 and Westpac declined 34 cents, or 1.57 per cent, to $21.26. The banks recovered from their intraday lows after the Reserve Bank of Australia said they had little direct exposure to the sovereign debt of the riskiest European countries and were more resilient to any disruption in credit markets. Market heavyweight BHP Billiton eased 37 cents to $43.06 and Rio Tinto dropped 44 cents to $82.06. Retailers sank after Premier Investments downgraded its earnings outlook and announced the closure of as many as 50 stores. Premier's shares slumped 19 cents, or 3.58 per cent, to $5.12. Preliminary national turnover reached 2.16 billion shares worth $5.13 billion, with 356 stocks up, 755 down and 339 unchanged.

The Australian dollar was lower late Monday as U.S. talks to resolve an impasse over raising the country's debt limit dragged into another week, heightening fears nothing will be achieved ahead of an Aug. 2 deadline to avoid a default. U.S. Republicans and Democrats were reported to be working on separate debt plans in Washington, dashing expectations that built up over the weekend that a deal would be struck before the opening of Asian markets Monday. Much is on the line with ratings agencies warning that failure to resolve the differences between leaders in Washington could see the U.S. stripped of its top shelf credit rating. According to a report in The Wall Street Journal on Monday, U.S. Secretary of State Hillary Clinton said in Hong Kong that she was confident the impasse would be resolved. The Australian dollar was at $1.0821, down from $1.0841 late Friday. Against the Japanese yen, the Australian dollar was at 84.91, down from 85.16.

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