Australian sharemarket falls nearly two per cent

PERTH - The Australian share market had a decidedly downbeat start to the new financial year yesterday, with resources and financial sectors losing ground following negative overseas leads.

At the close, the benchmark S&P/ASX200 index was down 80.9 points, or 2.05 per cent, at 3,874 points, while the broader All Ordinaries index fell 75.5 points, or 1.91 per cent, to 3,872.3 points.

IG Markets research analyst Ben Potter said trading volumes were very low in an uninspiring, lacklustre session.

"On Tuesday, the market was pumped up ... so most stocks that were heavily window-dressed then are having a bit of that fluff taken out of them, so to speak," Potter told AAP.

He said there would be little direction from overseas in coming days, with US markets shut for the Independence Day public holiday on Friday coupled with the northern hemisphere entering the summer holiday season.

"A lot of the fund managers are heavily focused on writing end of year reports," Potter said.

"Combine all that together and you get an environment that is low in action."

He said cyclical companies were being sold off.

"The likes of the miners, the ones that have outperformed the most since the bottom of the market in March."

Weaker commodity prices drove mining stocks lower. Mining giant BHP Billiton fell 82 cents, or 2.36 per cent, to A$33.90, while Rio Tinto shed 60 cents, or 1.15 per cent, to A$51.60.

The big four banks were down amid ongoing bad debts in the banking sector. Commonwealth Bank was 91 cents weaker at A$38.09, ANZ dipped 24 cents to A$16.25, National Australia Bank slid 75 cents to A$21.69 and Westpac lost 57 cents to A$19.68.

Litigation over Bank of Queensland's involvement with failed investment advisory firm Storm Financial could wipe out the bank's 2010/11 profit just as losses from bad debts peak.

Bank of Queensland shares were down 17 cents, or 1.87 per cent, at A$8.91.

The New Zealand market also slipped, but by not nearly as much.

The benchmark NZX-50 closed down 15.737 points yesterday, or 0.563 percent, at 2780.369.

- AAP, agencies