CLOSE Australian stocks have posted big falls to end significantly lower, pulled down by the resources and banking sectors as investors took profits ahead of news on the US central bank's plans for further asset buying to lift the economy, and US profits season.
The benchmark S&P/ASX200 index had its worst day in two months to end 79.3 points lower, or 1.7 per cent, at 4618.2 and the All Ordinaries was down 75.8 points, or 1.6 per cent, at 4686.3.
Materials stocks were down 2.2 per cent, industrials were 1.8 per cent lower and the financials index had fallen 1.6 per cent.
What you need to know
- The Australian dollar was lower at 97.78 US cents
- Dow Futures are 66 points lower at 10,897
- In the US, the S&P500 rose 0.15 of a point to 1165.3
- In Europe, the FTSE 100 rose 15.7 points to 5672.40
- Gold eased to $US1353.05 an ounce
- Oil was down at $US81.59 a barrel
- The Reuters Jefferies CRB Index rose 0.43%
Investors are waiting the Federal Reserve's policy minutes due later tonight for clues on the extent of its plans for more quantitative easing (QE).
"What they are doing to support the (US) economy is turning into a marathon rather than a sprint. There's a lot of uncertainties," said Austock client adviser Michael Heffernan.
But fund managers said further gains were likely for the local market once investors realised that a double-dip recession was unlikely in the United States, with US corporate balance sheets in good shape.
"Once the market appreciates this I think we will resume that recovery phase. There is plenty of upside left," said Fidelity head of Australian equities Paul Taylor.
He said Australian stocks were attractively valued at 11 or 12 times forward earnings, with high-quality companies no longer commanding a premium over poorer-quality rivals.
Local firms have historically traded at about 15 times forward earnings. Investors are combing through the prospectus for rail freight business QR National, which aims to raise up to $5 billion in Australia's biggest float since Telstra.
Mr Taylor said although he was cautious on the valuation of QR National, a successful float could re-open the pipeline for other IPOs in 2011 after a dour year for new offerings.
"If it goes well, it could help revive confidence," he said.
Miners sink
BHP Billiton was down 71 cents at $40.74, while Rio Tinto dropped $2.22 to $78.87.
Fortescue Metals Group was the worst performing stock on the S&P/ASX 100 index, closing down 25 cents, or four per cent, at $6.00.
The best performing stock on this index was casino operator Crown Ltd, which finished up 19 cents, or 2.23 per cent, at $8.72.
Among the major banks, ANZ was down 34 cents, or 1.41 per cent, at $23.82, Commonwealth Bank eased 67 cents, or 1.31 per cent, to $50.45 and Westpac dropped 50 cents, or 2.16 per cent, to $22.66 and National Australia Bank was 44 cents, or 1.71 per cent, softer at $25.36
The National Australia Bank business conditions survey showed corporate conditions rose to seven index points in September, up from five the month before, and still above the zero level that separates optimists from pessimists.
However, business confidence slid one index point to 10 points.
In other headlines, the coalition's communications and broadband spokesman Malcolm Turnbull said a Liberal government won't discard existing National Broadband Network (NBN) infrastructure if it wins the next election.
Shares in Telstra, which is yet to reach an agreement with the federal government on how the NBN will be implemented, backtracked three cents, or 1.12 per cent, to $2.65.
Shares in Conquest Mining were placed in a trading halt pending news of an expected capital raising of as much as $100 million to develop its Mt Carlton gold, silver and copper project in Queensland.
Conquest shares last traded at 50.5 cents.
Retailers drop
Among retail stocks, Coles owner Wesfarmers was down 71 cents, or 2.11 per cent, at $32.91, Woolworths gave up 22 cents to $28.98 and Harvey Norman eased nine cents, or 2.45 per cent, to $3.59.
The most traded stock by volume was Avanco Resources, with 186.6 million shares worth $40.49 million changing hands.
Shares in Avanco were up two cents, or 11.11 per cent, at 20 cents, after the copper and nickel explorer announced "spectacular" copper assays from its Rio Verde project in Brazil.
Preliminary market turnover was 2.65 billion securities worth $5.17 billion, with 402 stocks up, 733 down and 354 unchanged.
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Reuters, AAP with BusinessDay