Australian market makes remarkable turnaround

AUSTRALIAN shares made an incredible recovery to be flat after falling as much as 5 per cent during the morning.

AUSTRALIAN shares made an incredible turnaround to be flat after falling as much as 5 per cent during the morning.

At 2.45pm (AEST), the benchmark S&P/ASX200 index was up 2.8 points, or 0.07 per cent, at 3988.9, while the broader All Ordinaries index was down 8.1 points at 4048.6 compared with yesterday's close.

On the ASX 24, the September share price index futures contract was four points lower at 3949 points with 108,312 contracts traded.

The Australian market closed at a two-year low on Monday on expectations of a rout on the US bourse overnight, Wall Street's first trading session since Standard & Poor's downgraded the credit rating of US sovereign debt.

Overnight, Britain's FTSE 100 index closed down 3.4 per cent, France's CAC-40 slid 4.7 per cent, Germany's DAX tumbled five per cent and Greece's main stock market was the worst-performing in Europe, plummeting six per cent.

Austock Securities senior client adviser Michael Heffernan said before the recovery that investors were selling based on emotion.

Among the top 20 stocks, ANZ led the recovery, rising 38 cents, or 2.1 per cent, to $18.88, with the other major banks also in the black.

About half of the top 20 were in positive territory.