Australian shares closed almost one per cent lower, after making back some of the day’s losses, with investors worried about a critical German vote on the EU’s rescue fund.
The local bourse opened more than one per cent weaker following the end of a three-day rally on offshore markets.
The benchmark S&P/ASX200 index fell 31.2 points, or 0.77 per cent, to close at 4,008.3 on Thursday, while the broader All Ordinaries index lost 29.8 points, or 0.73 per cent, to 4,067.9.
Macquarie Private Wealth division director Lucinda Chan said sentiment was “lower than ever”, with markets watching developments on the eurozone debt crisis closely.
Germany, one of Europe’s biggest economies, will vote on expanding the scope and size of the EU’s current rescue fund – the European Financial Stability Facility (EFSF) – for debt-ridden Greece after the market closes.
That will be critical to staving off a global recession and to the local market’s future performance, Ms Chan said.
“Once it’s established, markets should see a way out of this mess.
“I don’t expect everything to be fixed overnight but at least (if) certainty comes into play it will settle the mood of the market at least.”
MF Global head of equity sales Nick Burmester said investors were in the hands of German politicians.
“The risk is still on the downside, markets tend to overshoot and if Europe drags on and people start to get more worried about commodities, our market can go a lot lower,” he said.
Broad-based losses were seen across most sectors.
Resources stocks registered the biggest falls on the market, with many investors selling in response to heavy falls in commodity prices over the past week and also in overnight trade.
The materials sector was down by 1.6 per cent.
BHP Billiton dropped 48 cents, or 1.4 per cent, to $35.04, and Rio Tinto lost $1.60, or 2.5 per cent, to $62.45.
Gold, silver and copper prices all drifted lower in offshore markets.
The spot price of gold in Sydney was $US1,623.3 per fine ounce, down $US29.53 from Wednesday’s close of $US1,652.83.
Fortescue Metals Group was down seven cents, or 1.2 per cent, to $4.45 after its chairman Andrew Forrest was granted leave to appeal a Federal Court decision that found he misled or deceived investors.
Energy stocks were weak for most of the day following falling oil prices after data showed a bigger-than-expected increase in energy stockpiles in the US.
But the sector closed 0.33 per cent higher after stocks were oversold, said Ms Chan.
Oil Search shares lost five cents to $5.62, Woodside Petroleum rose 20 cents to $32.14 and Santos added 21 cents to $11.27.
Uranium miner Paladin Energy was the weakest stock on the ASX 100, plunging 14 cents, or 10.7 per cent, to $1.17.
Typically defensive health care stocks also gained ground, with CSL the strongest performing stock on the ASX 100, adding 3.7 per cent to $29.87.
News Ltd reported that CSL had been accused of a series of manufacturing flaws by the US Food and Drug Administration (FDA), but the company said it had addressed the majority of manufacturing flaws highlighted by the FDA, and remaining concerns were being resolved.
National turnover was 1.78 billion shares worth $4.81 billion, with about seven of every 10 stocks falling.
Making news, Qantas was down three cents, or 2.1 per cent, to $1.42 after customs workers walked off the job for a second time this week.
More than 8000 domestic and international passengers will have their flights disrupted by strikes on Friday, the airline said.
The December share price futures index (SPI) fell 52 points to 4,011 points, with 41,071 contracts traded.
