Despite opening strongly, the Aussie market fell into a heap by the close amid signs Europe's debt crisis is worsening.

The morning's short-lived rally was snuffed out by reports Germany is looking to delay the next tranche of Greece's bailout money.

Friday's night rout on commodity markets weighed heavily on resource stocks. BHP fell 1.7% whilst Rio Tinto slumped another 3.9%.

Gold stocks were smashed in line with the freefall in bullion prices. Newcrest tumbled 9% and Kingsgate sank 10.3%.

The big banks all finished higher amid hopes the RBA will cut interest rates next week. CBA rose 1.2% and Westpac put on 2.5%.

The ASX 200 dropped 39 points (-1%), closing at 3864.