The Australian share market plunged dramatically on Tuesday with major indices down over 1.6 per cent driven by falling commodity prices and poor economic news.

• Business, consumer confidence plumb new lows
• Oil down 4% to fresh five-year low
• China economic dragon losing puff

The broad measure All Ordinaries index lost 90.6 points or 1.69 per cent to close at 5,258.3 and  the S&P/ASX 200 was off 1.68 per cent to 5,282.7.

Small cap stocks were hit hardest with the Small Ordinaries index closing down 2.28 per cent at 1908 and on the overall market 74.8 per cent of stocks fell.

The dollar weakened significantly hitting four year lows to trade at US82.39 cents, down from US82.90c on Monday.

Mimmicking  the dollar ,crude oil prices reached four and a half year lows after plunging 4 per cent in overnight trade when West Texas crude fell  below $US63 for the first time since July 2009.

That weakness played out in the Australian energy sector  with Woodside down 2.85 per cent to $34.38 , Oil Search down 7.13 per cent to $7.29 and Santos a  losing a whopping 7.23 per cent to $7.70 after being downgraded by Standard & Poor’s Monday.

A renewed decline in the iron ore  market has seen prices fall back below $US70 a tonne in China.

The big iron ore miners were punished as a result with Rio Tinto  off 2.85 per cent to $55.50 and Fortescue down 4.1 per cent to $2.55.

BHP Billiton, suffering a double whammy from both iron ore and oil, was down 4.05 per cent to $28.80, its lowest level since March 2009.

BHP also announced more details of its spin off company, South 32,  that will hold unwanted assets but the markets remained unimpressed.

Even the big banks, which defied expectations and rose on Monday in the face of the Murray inquiry calling for them to boost capital reserves, suffered in the market route.

ANZ experienced the biggest slide losing 1.6 per cent to $31.88  while the Commonwealth’s 0.45 per cent decline to $82.02 was the most moderate.

The retail sector was a hammered, with Myer falling by 5.2  per cent to $1.45, JB Hi-Fi nearly 2 per cent down and Harvey Norman 1.5 per cent at $3.60.

Supermarket giants were sold off with Woolworths down 1.78 per cent to $30.31 and Wesfarmers losing 0.4 per cent to close at $42.64.

Telstra lost 0.5 per cent and even Qantas, which as been a strong performer of lat, fell 0.42 per cent to $2.83.

Poor consumer and business sentiment figures also fuelled the market weakness.

ABC, Rod Myer