Australian stocks: Market closes down 1.7pc

MELBOURNE - Weaker commodity prices and a sell down of Rio Tinto shares from its $15 billion rights issue led to the Australian share market closing lower by around 1.7 per cent.

At 1615 AEST, the benchmark S&P/ASX200 index was down 69.2 points, or 1.72 per cent, at 3962.5 while the broader All Ordinaries index had lost 72.5 points, or 1.8 per cent, to 3,957.9 points.

On the Sydney Futures Exchange, the June share price index contract was 78 points lower at 3,953 on a volume of 112,175 contracts.

Patersons Securities associate director John Curtin said the market pull-back came after a two per cent sell-off on Wall Street, weaker commodity prices and close of Rio Tinto's $15 billion rights issue on Tuesday.

"The main focus today has been on Rio. They will trade ex-rights tomorrow," he said.

"The effective price ex-rights will be around the $57 to $58 mark at these sort of levels."

Rio's share price was trading at around $67 when the 21 for 40 share rights issue was announced at a discounted price of $28.29 per share, Mr Curtin said.

"So you get to buy half your holding again at a price that ex-rights will work out to be around half the price."

Rio shares finished $2.27, or 3.01 per cent, weaker at $73.23 in anticipation of the share price fall on Wednesday, Mr Curtin said.

Rival BHP Billiton lost 54 cents, or 1.46 per cent, to $36.46.

Major oil stocks lost ground, with Santos the worst hit. It finished down 72 cents, or 4.85 per cent, to $14.12.

Oil Search declined 17 cents to $5.63 and Woodside Petroleum fell $1.35 to $40.85.

By 1618 AEST major gold stocks were mixed, with Newcrest Mining firming four cents to $31.60, Lihir Gold one cent softer at $2.91 and dual-listed Newmont Mining Corporation down seven cents at $5.18.

At 1620 AEST, the spot price of gold was US$932.40 per fine ounce, down US 60 cents on Monday's close of US$933.00.

"Defensive stocks have definitely got a bit of support today," Mr Curtin said.

Telstra firmed three cents to $3.38 and grocery giant Woolworths gained four cents to $26.16.

Major financial stocks lost ground across the board.

ANZ Banking Group led the big four banks lower, down 50 cents, or 2.89 per cent, to $16.80.

National Australia Bank lost 28 cents to $21.91, Commonwealth Bank fell 11 cents to $38.10 and Westpac eased one cent to $19.86.

Australia's largest investment bank, Macquarie Group, fell $1.47, or 3.76 per cent, to $37.60.

By 1630 AEST major retailers were weaker across the board, with Harvey Norman losing 12 cents to $2.98 and David Jones down seven cents to $4.01.

Making news on Tuesday, global surfwear retailer Billabong said it would cut debt and bolster its working capital position after raising $291 million from institutions and retail investors in a rights issue.

Billabong's share price dropped 10 cents to $8.50.

Shares in agricultural chemicals supplier Nufarm Ltd fell $1.47, or 12.15 percent, to $10.63 after the company issued a profit warning, saying this financial year's net operating profit is likely to be about 15 percent lower than forecast.

Macquarie Communications Infrastructure Group (MCG) shares surged 61 cents, or 26.29 percent, to $2.93 after the Canada Pension Plan Investment Board's takeover offer of $2.50 cash for every MCG stapled security was raised to $3.00 on Tuesday.

Media stocks lost ground, with Fairfax Media falling 6.5 cents to $1.265 and Consolidated Media easing four cents to $2.28.

News Corporation lost 26 cents to $14.09, while its non-voting scrip dropped 20 cents to $12.40.

Hawthorn Resources was the top traded stock by volume, with 116.5 million shares changing hands for $1.28 million. Its share price was down 0.1 cents, or 9.09 percent, to one cent.

Preliminary national turnover reached 2.22 billion shares, traded for $4.86 billion, with 327 stocks up, 769 down and 325 steady.

- AAP