Australian shares closed near the day's lows as investors turned bearish in the afternoon and sold off miners and banks amid concerns about US debt ceiling talks.

The benchmark S&P/ASX200 fell 27.1 points, or 0.6 per cent, to 4690.2, while the broader All Ordinaries lost 25.8 points, or 0.5 per cent, to 4712.3.

Among the major sectors, materials and financials fell 0.8 per cent, while energy rose 0.6 per cent and telcos added 0.2 per cent.

CommSec market analyst Steve Daghlian said the Australian market defied negative overseas leads in early morning trade before gains were reversed in the afternoon.

‘‘It could have gone either way, but as the day progressed the market went from being slightly higher to around half a per cent lower and there didn’t appear to be one particular driver,’’ Mr Daghlian said. ‘‘At the end of the day we’re doing a bit of profit taking.’’

The local market is still sitting at its highest levels in about 18 months following overall gains of more than 1per cent since the beginning of the year.

However, Mr Daghlian said the US debt ceiling and upcoming spending cuts would continue to weigh on global markets.

Locally the mining giants were all weaker. BHP Billiton fell 31 cents to $37.50 and Rio Tinto plummeted 80 cents to $66.60 and Fortescue fell 15 cents to $4.74.

Three of the four major banks were weaker. ANZ fell 24 cents to $25.17, Westpac finished flat at $26.28, National Australia Bank dropped 21 cents to $25.09 and Commonwealth Bank dived $1.23 cents to $61.37.

The Australian Industry Group and the Housing Industry Association also released a report showing activity in Australia’s construction industry has slowed for the 31st consecutive month, with the home and apartment sector remaining especially weak.

National turnover was 1.3 billion shares worth $3.9 billion, with 386 stocks up, 527 down and 359 unchanged.

BusinessDay with wires