asx200 index seen below 5000

THE share market has dropped this morning after soft US data overnight revived fears the world's biggest economy is in recession - and one local analyst has predicited the key S&P/ASX200 index will soon fall below 5000.

At 10.10am AEDT, the benchmark S&P/ASX200 index was down 37.6 points, or 0.7 per cent, at 5343.8, while the broader All Ordinaries declined 32.7 points, or 0.6 per cent, to 5388.6.

Local banking stocks fell, with NAB declining 32 cents, or 1.05 per cent, to $30.03, Commonwealth Bank losing 66 cents, or 1.53 per cent, to $42.45, ANZ slipping 31 cents, or 1.29 per cent, to $23.81 and Westpac dropping 28 cents, or 1.13 per cent, to $24.52.

Aequs Securities institutional dealer Ric Klusman said stocks had declined on the back of the weakness in the US.

”The banks are copping it predominantly, together with the industrials, on the continuation of this credit mess,'' Mr Klusman said.

Australian shares were likely to continue falling, with the ASX 200 going below 5000 over the coming weeks, Mr Klusman said.

The investment banks fell, with Macquarie Group down $1.32, or 2.44 per cent, at $52.80 and Babcock & Brown losing 50 cents, or 3.33 per cent, to $14.50, as of 10.31am.

The Dow Jones Industrial Average finished down 109.74 points, or 0.88 per cent, at 12,422.86. The Standard & Poor's 500 Index dropped 11.86 points, or 0.88 per cent, to end at 1341.13

Westfield, which owns shopping malls in the US, fell 51 cents, or 2.74 per cent, to $18.09.

Among the industrial stocks, Brambles lost 20 cents, or 1.97 per cent, to $9.94, and Leighton dropped 38 cents, or 0.93 per cent, to $40.62, after it announced it had won $US300 million in new work in Hong Kong and The Philippines.

Mining stocks prevented greater losses in the market, benefitting from higher commodity prices overnight, Mr Klusman said.

BHP Billiton gained 44 cents, or 1.25 per cent, to $35.75 and Rio Tinto added $2.07, or 1.75 per cent, to $120.34.

Woodside led oil producers higher after the oil price gained, its stock rising 69 cents, or 1.3 per cent, to $53.68.