The US Congress voted down the bailout by 228 votes to 205 votes on Monday, with both Democrats and Republicans blaming each other over the plan’s failure.

Wall Street plunged almost immediately on the news with the Dow Jones Industrial Index plummeting 777 points (7%) to 10365.45, a record fall.

Closer to home, the benchmark S&P/ASX 200 index has slipped 264.4 points, or 5.6%, in morning trade, while the broader All Ordinaries slipped 268 points, or 5.5%, to 4571.2 points.

Australian Prime Minister Kevin Rudd has told reporters that the failure of the bailout was a “bad development” and has appealed to US lawmakers to pass the plan.

“It will prolong the liquidity problems that we’ve been experiencing in financial markets,” he said.

Base metal prices on the London Metal Exchange nose-dived overnight with the likelihood of a global recession fanning fears of a drop in demand for commodities.

Three month traded copper dropped 4.9% to close at $US6440 per tonne, nickel dipped 3.5% to $16,400/t while zinc fell 4.4% to $1692/t and aluminium fell 2% to $2441/t.

The big miners were among the hardest hit this morning with BHP Billiton hitting a low of $30.85, a 9% drop, before climbing to $31.85 in late morning trade, while Rio Tinto has dropped as much as 10% to a low of $86.01 before climbing to $87.87.

Of the coal players, the smaller and mid-tier companies were also hit hard.

At mid-morning trading today Northern Energy dropped almost 15%, Straits Resources 11.5% and Felix Resources almost 10%.

Sedgman, Whitehaven Coal, Macarthur Coal and Riversdale Mining all dropped between 8-10%.

Iron ore play Fortescue Metals Group has plummeted as much as 20% to a low of $4.52 before climbing slightly to $4.77, while OZ Minerals fell 7.7% to $1.57.

Spot gold was trading at $US904.7 an ounce, down 25c, this morning after the price shot to a two-month high of $927/oz yesterday in the wake of the US Congress voting down the bailout package.

Kitco Bullion Dealers senior analyst Jon Nadler said in a note that with the Indian buying season commencing around midweek, and a sufficient number of individual investors seeking its shelter at this time, gold should have little trouble adding a further $100 to the price charts in order to reach the $1000/oz mark once again.

Gold plays listed on the Australian bourse were up in morning trade, with Newcrest Mining jumping 2.4% to $A28.73, Lihir Gold up 1.5% to $2.74 and Sino Gold Mining up 0.5% to $4.40.