The Australian share market has fallen by more than one per cent – its biggest one-day fall in six weeks.
CMC markets chief market analyst Ric Spooner said lower iron ore prices weighed upon the big miners.
Also, the major banks suffered significant falls as overseas investors pulled out due to the declining value of the Australian dollar.
“It’s certainly a worse day than otherwise may have been anticipated when we opened up this morning,” Mr Spooner said.
Mr Spooner said it had been expected that lower iron ore prices and concerns about China’s economic strength would drag on mining stocks.
But that was compounded on Monday when iron ore futures in China weakened further.
Monday’s sell-off in high-yielding stocks such as the banks was surprising, given that those stocks had found some support late last week from bargain hunters.
Mr Spooner said the resumed sell-off in the banks may partly reflect the view of offshore investors that the sustainability of the banks’ earnings could be threatened by Chinese economic weakness.
Also, the weakening of the Australian dollar was degrading the value of offshore investors’ holdings in Australia.
Mr Spooner said the banks should become attractive again to bargain hunters, but it was impossible to guarantee that the sector wouldn’t fall further.
It was also difficult to determine how much further the China-related parts of the Australian market may fall.
Investors were likely to be data-driven in that area and would be keenly awaiting the latest manufacturing figures from China on Tuesday.
Among the major banks, Commonwealth Bank was down $1.36 at $76.45, Westpac slumped 77 cents at $32.40, National Australia Bank sagged 80 cents to $33.10, and ANZ retreated 71 cents to $31.21, according to preliminary closing figures.
BHP Billiton lost 62 cents at $34.86, Rio Tinto reversed $1.54 to $60.05, and Fortescue Metals gave away 18 cents at $3.58.
Laboratory testing services group ALS plunged $1.20, or 17.22 per cent, to $5.77 after it warned its half year profit is likely to fall 36 per cent.
KEY FACTS
* At 1624 AEST on Monday, according to preliminary closing figures, the benchmark S&P/ASX200 index was down 70.1 points, or 1.29 per cent, at 5,363.0 points.
* The broader All Ordinaries index was down 69.1 points, or 1.27 per cent, at 5,368.2 points.
* The December share price index futures contract was down 64 points at 5,362 points, with 29,312 contracts traded.
* National turnover was 1.56 billion securities worth $3.94 billion.
