Aust stocks close lower

Local market drops in light trade as financial stocks fall on debt ceiling worries.

The Australian stock market fell in light trade, with the big four banks dragging on the market as investors worry about debt ceiling negotiations in the United States.

At 1525 AEDT, the benchmark S&P/ASX200 index was 0.9% lower at 5,161.1 points, while the broader All Ordinaries index fell 0.87% to 5,160.6 points.

IG analyst Stan Shamu said US Republican house speaker John Boehner's comments saying he would not pass a bill to lift the debt ceiling without addressing long-term spending and budget challenges have rattled markets.

"The major banks have led the falls as the US debt limit situation threatens to cause strain in the credit markets," Mr Shamu said.

Local trade has been quiet, with four states closed for the Labour Day public holiday, and Chinese markets are also closed for holidays.

"The miners have just been drifting through the session with some investors positioning themselves for China reopening tomorrow," he said.