Australian stocks close 2.91pc lower

SYDNEY: Australian stocks plunged 2.91 percent on Monday after Standard & Poor's fuelled global economic jitters by cutting the US credit rating for the first time in history.

The benchmark S&P/ASX 200 plummeted 119.3 points to 3,986.1 after the ratings agency docked the United States from AAA to AA+ with a negative outlook.

It followed the market crashing 4.0 percent on Friday -- its biggest one-day loss since the height of the global financial crisis -- and 7.2 percent in total last week.

"Today's price action has been a direct reaction -- some would say, overreaction -- to S&P's weekend downgrading of the US credit rating to AA+ from AAA," said IG Markets analyst Ben Potter.

"There has definitely been an element of 'sell first, ask questions later' in today's trading behaviour. No one really wants to wait around and see how the US market reacts tonight."

The Australian dollar was also lower, losing more than one US cent to 103.24 US cents, from 104.42 cents on Friday.

Copyright AFP (Agence France-Presse), 2011