Just over $31 billion was wiped from the value of Australian shares as Italy became the new centre of concern in the eurozone debt crisis.
Both major share market indices fell the most in a month over concerns about Italy’s ability to service its debt mountain and the implications for the future of the euro as a common currency.
The benchmark S&P/ASX200 index was down 102 points, or 2.35 per cent, at 4,244.1, while the broader All Ordinaries index hadslumped 98.9 points, or 2.24 per cent, to 4,307.3.
The December share price index futures contract was 73 points lower at 4,264 points, with more than 40,000 contracts traded.
RBS Morgans private client adviser Trent Muller said the share market continued to be driven by economic uncertainty rather than equity markets fundamentals.
Dominating concerns was a spike in Italian government bond yields to more than seven per cent – the level that Greece, Ireland and Portugal hit before needing to be bailed out.
“A lot of people are expecting certain commentary could come out tonight that could appease concerns,” Mr Muller said.
He said there was the potential for Italy’s Prime Minister Silvio Berlusconi to resign tonight and for an easy transition to the next leader.
“If that occurs, one would assume markets will be a little bit more comfortable … and we’ll get a global rally back to levels that we were at two or three days ago.”
Mr Muller said the local bourse was down three per cent at open but managed to claw back some of the losses after a more than six per cent rise in the spot iron ore price overnight.
Rio Tinto finished down $1.87, or 2.64 per cent, at $68.88 while Atlas Iron slipped six cents, or 1.85 per cent, to $3.18.
BHP Billiton backtracked 85 cents, or 2.22 per cent, to $37.48 after finalising an agreement with the West Australian government to increase the royalty rate for its iron ore fines product.
Iron ore miner Fortescue Metals slumped 41 cents, or 8.04 per cent, to $4.69.
Another major factor that caused the share market to decline was National Australia Bank (NAB) and ANZ going ex-dividend.
NAB was down $1.23, or 4.77 per cent, at $24.53 and ANZ slipped $1.24, or 5.7 per cent, to $20.52.
Westpac was weaker by 70 cents, or 3.25 per cent, at $20.86 while Commonwealth Bank slipped $1.13, or 2.26 per cent, to $48.83.
Mr Muller said consumer electronics retailer JB Hi-Fi was a highlight, up 2.22 per cent, or 35 cents, at $16.10, possibly due to short covering.
Making headlines on Thursday, pallet supplier Brambles said its first quarter sales revenue was up 32 per cent and forecast full year underlying profit of as much as $US1.1 billion ($A1.09 billion).
Brambles was down three cents at $6.65.
Fairfax Media chief executive Greg Hywood said trading conditions had not improved since the company delivered its 2010/11 full year results in August.
Fairfax shares eased half a cent to 92.5 cents.
The spot price of gold in Sydney was $US1,760.79 per fine ounce, down $US27.44 from the local closing price on Wednesday of $US1,788.23.
Gold miner Newcrest was cheaper by 47 cents, or 1.27 per cent, at $36.40.
National turnover was 1.95 billion shares worth $5.89 billion, with about 18 shares falling for each one that gained.
