Australian stocks: Market closes sharply lower

MELBOURNE - The Australian share market closed sharply lower on Tuesday following a steep drop on United States markets where investors were again unsettled by the health of banks.

The local bourse fell as Reserve Bank of Australia governor Glenn Stevens said it was reasonable to conclude that Australia was in recession and that confidence was the key to recovery.

Analysts said Mr Stevens was merely stating what the market already knew.

At the 1615 AEST close, the benchmark S&P/ASX200 index had dropped 91.6 points, or 2.43 per cent, to 3677.4 and the All Ordinaries index had fallen 89.2 points, or 2.4 per cent, to 3633.1.

On the Sydney Futures Exchange, the June share price index futures contract was 93 points lower at 3672, on a volume of 25,006 contracts, according to preliminary calculations.

On Wall Street on Monday night (AEST), the Dow Jones Industrial Average index fell 289.60 points to 7,841.73 as investors' unease about banks was renewed by Bank of America Corp setting aside US$13.4 billion (A$18.54 billion) to cover lending losses.

ABN Amro Morgans private client adviser Simon Ferguson said the weak lead from the US had raised the spectre of another round of bad news from the financial sector.

"So we've seen that sector hit pretty hard (here in Australia)," Mr Ferguson said.

Mr Ferguson said recent comments from Mr Stevens and Prime Minister Kevin Rudd on the likelihood of Australia being in, or heading into, a recession had little effect on the market.

"It's an open secret that we're in recession, and it shouldn't come as a surprise to anyone," Mr Ferguson said.

"I think the market seems to be taking its cue pretty much from the US."

Among the major banks, Commonwealth Bank shed 62 cents to $35.88, National Australia Bank slumped 89 cents to $21.16 and ANZ reversed 68 cents to $16.37.

Westpac was 52 cents weaker at $19.74, and on Tuesday raised its interest rates on fixed home loans by up to 40 basis points.

In the resources sector, global miner BHP Billiton surrendered $1.32 to $31.56 and Rio Tinto lost $3.37 to $54.53.

Ivanhoe Australia soared 43 cents to $1.88 after it said it had found a deposit of molybdenum-rhenium at its Merlin project in north-west Queensland that had the potential to be worth as much as $6.4 billion.

Oil and gas producer Woodside Petroleum descended $1.33 to $36.97 and Santos gave away 63 cents to $16.20.

Oil Search was four cents richer at $5.18 after it said its March quarter oil and gas production fell but expects a better second quarter performance.

Retailer Woolworths was up 14 cents at $26.78. Wesfarmers, which owns Coles, improved 46 cents to $20.86 as it said the turnaround of Coles was on track although there was still "a long way to go".

Telco Telstra scraped off one cent at $3.20, and Optus-owner Singapore Telecommunications slid four cents to $2.34.

In the media sector, News Corp backtracked 26 cents to $12.20, and its non-voting stock jettisoned 28 cents to $10.80.

Consolidated Media weakened six cents to $2.04, and Fairfax sagged four cents to $1.13.

In the gold sector, Newmont gained 27 cents to $5.54, Newcrest added $1.26 to $29.10, and Lihir improved eight cents to $2.87.

The price of gold in Sydney at 1631 AEST was US$887.80 per fine ounce, up US$16.80 on Monday's close of US$871.00.

Among other stocks, ports and rail freight operator Asciano Group retreated 16 cents to $1.385 after it said it had received some non-binding takeover offers and offers for individual assets.

Boart Longyear dived 3.5 cents to 14 cents after the drilling services contractor forecast 2009 revenues to be as much as 45 per cent weaker than last year.

Casinos and cinemas operator SkyCity Entertainment Group was in a trading halt at $2.37 as it announced plans to raise at least $179 million through the issue of new shares, to help reduce debt.

Gaming machine maker Aristocrat Leisure was in a trading halt at $3.98 after it said it expected a "disappointing" first-half net profit and was seeking to raise up to $275 million through a share sale.

Property trust GPT Group was off nine cents as it appointed the former chief financial officer of St George Bank, Michael Cameron, as its new chief executive.

Investment firm Babcock & Brown Capital was down three cents at 97 cents as it said it was considering several takeover proposals.

The top-traded stock by volume was Prima Biomed, with 159.3 million shares worth $8.54 million. Prima was three cents higher at 6.4 cents.

Preliminary national turnover was 1.61 billion shares worth $3.72 billion, with 670 stocks down, 321 up and 248 unchanged.

- AAP