Australian shares ended near their lowest point this month as investors took cash off the table ahead of a weekend of crunch talks on the future of the eurozone.
Shares closed more than 1.8 per cent lower as news emerged that European leaders have failed to agree a change to Europe’s constitution that would have applied stricter budget discipline across all 27 member states.
But a glimmer of hope from reports that agreements had been reached between European countries on a new fiscal compact – along with positive data from China – helped markets claw back some of their earlier losses.
“We were seeing squaring of positions, with those who have been short closing on to an idea that perhaps, just perhaps European leaders may shock the market and actually put a credible plan together,” market strategist at IG Markets Stan Shamu said.
At the close on Friday, the benchmark S&P/ASX200 index was down 77.7 points, or 1.8 per cent, at 4,203, while the broader All Ordinaries index was down 74.8 points, or 1.7 per cent, to 4,264.1.
On the ASX 24, the December share price index futures contract was down 94 points at 4,189, with 47,703 contracts traded.
In China, data showing that inflation fell sharply to 4.2 per cent signalled that the Asian giant’s economy is cooling faster than expected and prompted speculation that Beijing could step up its monetary easing policies.
But the head of research at Shaw Stockbroking, Martin Crabb, said concerns over the outcome of the eurozone crisis mean investors are taking cash off the table ahead of the weekend.
“Both eyes are firmly on Europe, to the point where China is almost a side issue right now,” he said.
“Fund managers are really focussed on the risk side of things, which is why the miners are suffering so much today.”
Resources stocks finished the day down 2.4 per cent. Rio Tinto finished the day down $2.35 or 3.6 per cent, to $63.74 and BHP Billiton fell $1.13, or 3.1 per cent, to $35.86.
Energy shares shed 1.9 per cent and the industrial sector ended 1.5 per cent lower.
Financial stocks also came under pressure from uncertainty over Europe, losing 1.3 per cent as investors feared that the rising cost of raising money overseas would put pressure on bank margins.
“Banks are going to suffer, given the fact that their funding costs will be going up,” Paterson Securities client advisor Peter Morgan said.
ANZ Bank fell 1.3 per cent to $20.85, Commonwealth Bank shed 1.7 per cent to $48.84, National Australia Bank fell 2.4 per cent to $24.02 and Westpac lost 2.1 per cent to hit $21.07. Macquarie Group was down 2.4 per cent at $24.38.
Among the few gainers of the day was Extract Resources, which finished up 4.7 per cent at $8.47.
Australia’s corporate watchdog said China’s state-owned power company must launch a $2.2 billion takeover for Extract if it is successful for its bid for Extract’s 43 per cent shareholder.
National turnover was 1.96 billion shares worth $4.2 billion, with 295 shares up, 656 down and 362 unchanged.
The price of gold in Sydney closed at $US1,717.40 per fine ounce, down $US20.07 from $US1,737.47 on Thursday.
