About $30 billion was wiped from the value of Australian shares today as Italy emerged as the new centre of concern in the euro-zone debt crisis.
Both major sharemarket indices fell to their lowest level 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 shed 102 points, or 2.35 per cent, at 4244.1 points, while the broader All Ordinaries index slumped 98.9 points, or 2.24 per cent, to 4307.3 points.
Regional markets joined the rout, with Japan’s Nikkei 225 index falling 2.9 per cent, Hong Kong’s Hang Seng diving 4.5 per cent and South Korea’s Kospi sliding 3.7 per cent.
Italy's yields rattle investors
Global investors were rattled after Italy’s main borrowing rate blew past 7 per cent - putting the country at the front and centre of a debt crisis that had until recently focused mainly on Greece.
The 7 per cent figure is considered an important level because Greece, Portugal and Ireland required bailouts from other nations when interest rates on their bonds hit that mark.
As the third-largest economy in Europe, Italy’s $US2.6 trillion debt is considered too large for other European countries to absorb. A default could lead to the disintegration of the euro currency used by 17 nations or a debilitating recession.
RBS Morgans private client adviser Trent Muller said the sharemarket continued to be driven by economic uncertainty rather than the fundamentals of equity markets.
‘‘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.’’
Miners end off lows
The local bourse was down 3 per cent at the open but managed to claw back some of the losses after Chinese trade data showed a surge in imports from Australia.
Rio Tinto finished down $1.87, or 2.6 per cent, at $68.88 while Atlas Iron slipped 6 cents, or 1.85 per cent, to $3.18. BHP Billiton backtracked 85 cents, or 2.2 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 per cent, to $4.69.
Another major factor driving the sharemarket lower was National Australia Bank and ANZ going ex-dividend. NAB was down $1.23, or 4.8 per cent, at $24.53 and ANZ had slipped $1.24, or 5.7 per cent, to $20.52.
Westpac at one-month low
Westpac was weaker by 70 cents, or 3.25 per cent, at $20.86, its lowest in one month, while Commonwealth Bank slipped $1.13, or 2.3 per cent, to $48.83.
Mr Muller said consumer electronics retailer JB Hi-Fi was a highlight, up 2.2 per cent, or 35 cents, at $16.10, possibly due to short covering.
Making headlines, 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 ($1.09 billion).
Brambles was down 3 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.
National turnover was 1.79 billion shares worth $5.71 billion, with 259 stocks up, 788 down and 331 steady.
BusinessDay with agencies