Australian shares fell more than one per cent ahead of scheduled talks between Greece, the IMF and EU, and a meeting of the US Federal Reserve.
By the close, the benchmark S&P/ASX200 index declined 41.3 points, or 1.01 per cent, to 4,040.2, while the broader All Ordinaries index fell 39.3 points, or 0.94 per cent, to 4,124.8.
The local bourse opened about half a per cent lower after ratings agency Standard & Poor’s did “the last thing” investors wanted itto do – downgrading Italy’s credit rating, said IG Markets dealer Chris Weston.
“Even though values are ridiculously cheap … investors are looking short term at how (headlines) decipher into future policy and these bailouts,” he said.
Shares were sold off in afternoon trade in trepidation ahead of potentially key developments in the European and US debt crises.
The US Federal Reserve’s Open Market Committee two-day meeting begins on Tuesday (US time), amid speculation Fed chairman Ben Bernanke could announce a fresh stimulus package.
Greece will also continue talks with the IMF and EU on Tuesday after being warned to tighten austerity measures and ramp up state asset sales to secure rescue funds and stave off bankruptcy early next month.
“Unfortunately again we can blame investor jitters … a lack of anything positive to drive them (shares) higher has seen an afternoon sell-off occur again,” said Commsec market analyst Juliette Saly.
National turnover was 1.58 billion shares changing hands for $4.22 billion, with about seven out of every 10 shares trading lower.
On the ASX 24, the December share price index futures contract dropped 50 points to 4,044 points, with 37,882 contracts traded.
Materials and financials – the largest sectors on the market – were hardest hit, falling 1.6 and 1.3 per cent, respectively.
Mining giant BHP Billiton dropped 2.1 per cent, or 80 cents, to $36.80, with fellow miner Rio Tinto down 1.9 per cent, or $1.30, at $68.90 after commodity prices fell on offshore markets.
The biggest retail banks also took a beating from contagion fears from the eurozone debt crisis. National Australia Bank fell the furthest, shedding two per cent to $22.00.
The weakest company on the ASX 100 was uranium mining company Paladin Energy, which dived 6.7 per cent to $1.47. The best performing stock on the same index was biopharmaceutical group CSL, which rose 2.8 per cent to $27.20.
Investors bought into health care stocks and consumer staples, which allowed the typically defensive sectors to outperform the market, rising 0.8 and 0.5 per cent respectively.
Making news on Tuesday, more than 4,000 of Qantas’ ground staff walked off the job in a four-hour work stoppage after last-minute talks with the Transport Workers Union (TWU) failed to reach a resolution on Monday.
The airline’s shares fell 2.5 cents, or 1.6 per cent, to $1.52.
Shares in grocery wholesaler Metcash rose four cents to $4.12 after the Federal Court dismissed the competition watchdog’s bid to stop the company’s $215 million deal to purchase the Franklins supermarkets.
The spot price of gold in Sydney was $US1,774.1 per fine ounce, down $US49.60 from $US1,823.70 on Monday.
