Resource companies led broad-based declines in the Australian share market Thursday after commodity prices got pummelled alongside other risk assets amid persisting European debt concerns. Banks fell after National Australia Bank said volatile markets were pushing up funding costs.
BHP Billiton fell 1.8%, Rio Tinto slid 2.8%, and Fortescue Metals lost 3.4%. Gold miner Newcrest Mining declined 2.9%, Woodside sank 1.7% and Origin Energy fell 2.3%, in tandem with weaker offshore equities, oil and metal prices. National Australia Bank dropped 1.6%, leading a measure of financial stocks down 1%.
The Australian share market recovered slightly after HSBC's flash China manufacturing PMI rose to 49 December from 47.7 in November, but Asian markets remained weak, with the Hang Seng index down 1.9% and Shanghai Composite down 1.4% in late trading.
"Resources will continue to drag on the S&P /ASX 200 going into next year," said CityIndex chief market strategist Peter Esho . "Copper looks particularly vulnerable, and it's a lead indicator for everything in terms of industrial production."
The benchmark S&P /ASX 200 closed down 1.2% at 4139.8 after hitting an 11-day low of 4124.5, for its third straight daily decline. Volumes were inflated by Thursday's expiry of December share price index futures.
Europe's STOXX 600 fell 2% and the U.S. S&P 500 sank 1.1% overnight as concern grew that European borrowing costs would continue rising and attention turned to a potential downgrade of France by Standard & Poor's after French Foreign Minister Alain Juppe said a credit-rating cut wouldn't be "cataclysmic."
The Wall Street Journal reported a French official as saying the government hadn't been informed of any imminent downgrade.
The S&P /ASX 200 index is down about 13% so far this year as Europe's unfolding debt crisis exacerbated investor concern over slowing global economic growth. A gauge of materials stocks is down almost 24% this year, reflecting weaker commodity prices amid fear of a sharp global demand slowdown.
London Metals Exchange copper fell 5.1% Wednesday, while Nymex crude oil dropped 5.2%.
"Obviously BHP and Rio are exposed to the bulks in terms of their earnings profile," CityIndex's Esho said.
Consumer discretionary stocks and property trusts outperformed the market, with Ten Network rising 3.8%, Westfield gaining 0.6% and Stockland climbing 1.2% .
Financials ex-property trusts performed in line with the market, with the major banks down 0.9%-1.6%. National Australia Bank Chairman Michael Chaney said that if funding markets worsened it could be difficult to borrow term funds. But he said he expects conditions to improve as the situation in Europe stabilizes.
CityIndex's Esho said he expects support to emerge around 4000 on the S&P /ASX 200 as some of the money that will be paid to investors in bank dividends, and related to the takeover of Foster's and Coal & Allied, finds its way back into the market in coming weeks.
-by David Rogers , Dow Jones Newswires: 61-2-8272-4693: david.rogers1@ dowjones.com
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