The Australian share market fell more than one per cent to a two-year low, pulled down by investors selling out of miners and energy companies after commodity prices slumped.
Gold miners led the tumble after the price of gold dropped by more than $US150 over the weekend.
Stocks started the day in positive territory following German Chancellor Angela Merkel’s hour-long television interview, which renewed talks of a possible Greek bailout.
But within afew hours the local bourse began shedding value, with both major indices dropping well below the 4,000-point mark to the lowest since July 2009, when the market was emerging from the depths of the global financial crisis.
The benchmark S&P/ASX200 index fell 39.3 points, or one per cent, to 3,863.9, while the broader All Ordinaries index slumped 50.9 points, or 1.3 per cent, to 3,927.6, the lowest since July 2009.
On the ASX 24, the December share price index futures contract was down 48 points at 3,882, with 49,095 contracts traded.
RBS Morgans Ipswich manager Tony Russell said overseas investors had sold out of miners and energy companies after commodities’ weak performance on the weekend.
Both the materials and energy sectors plummeted by 3.9 per cent.
“A lot of money flowed into commodities as a safe haven in the last 12 months and maybe there’s some profit taking … we’ve seen a sell off there and the ongoing effect of that is being reflected in (major material stocks),” he said.
Gold slumped late on Friday because of renewed strength in the US dollar and talk of hedge fund liquidation wrecking its safe-haven status.
The spot price of gold in Sydney was $US1,581.89 per fine ounce, down $US163.82 from Friday’s close of $US1,745.71.
Australia’s biggest gold miner Newcrest also tumbled $3.24, or nine per cent, to $32.86, and was the worst performer among the top 50 companies.
Mining giant Rio Tinto shed 3.9 per cent, or $2.45, to $60.20 and fellow miner BHP Billiton fell 60 cents, or 1.74 per cent to $33.95.
Rare earth explorer Lynas Corporation was the worst performing stock on the S&P/ASX 100, plummeting 17.1 per cent to 87.5 cents.
The best performing stock on the same index was James Hardie Industries, which gained 5.52 per cent to $5.73.
Energy stocks also slipped after world oil prices slumped. Santos fell 45 cents, or 4.15 per cent, to $10.40 and Woodside Petroleum lost $1.57 to $29.80.
Mr Russell said trading volumes were moderate, reflecting a lack of buyers.
Turnover was 2.51 billion shares changing hands for $5.74 billion, with about seven out of every ten stocks falling.
Typically defensive health care stocks outperformed, up 1.45 per cent, with medical diagnostic company Sonic Healthcare gaining 2.6 per cent to $11.58.
The financial sector recovered slightly from a major sell-off last week to close 0.75 per cent up, after a significant rebound in European bank stocks on Friday.
All the major retail banks rose in value, with Westpac the strongest performer, up 2.46 per cent at $19.19.
Supermarket giant Woolworths gained 20 cents to $24.77 after it reiterated its forecast of a two- to six-per cent increase in this year’s net profit.
Burrell Stockbroking adviser Jamie Elgar said he expected bouts of volatility to continue in coming weeks, with any rise in the market tentative on ongoing uncertainty.
