Australia shares at 2-week low; David Jones plunges 18pc

MELBOURNE: Australian stocks fell 0.5 percent to the lowest close in two weeks on Thursday, pulled down as department store David Jones plunged 18 percent after a profit warning, sending wider retailers and media stocks lower.

News Corp was the exception, rising 3.1 percent to A$15.20 after Rupert Murdoch withdrew his bid for broadcaster BSkyB , prompting analysts to predict the company may return cash to shareholders.

David Jones fell to a 26-month low of A$3.20 in its biggest one-day percentage slide after warning trading conditions had deteriorated rapidly. It slashed its profit forecast to expect up to a 2 percent fall this year and warned of a 15-20 percent drop in the first half of next year.

"The depth of that sales decline at David Jones has just sent the shivers all over the discretionary sector," said Martin Duncan, analyst at Arnhem Investment Management.

Rival Myer, which on Thursday reaffirmed its 2011 guidance for a profit drop of up to 5 percent, fell 6.4 percent to an all-time low.

Harvey Norman and JB Hi-Fi shed over 4 percent each, while shares in Pacific Brands, Billabong International and Westfield Retail also all fell.

Media shares such as Fairfax Media and Seven West Media , which get a large chunk of their ad sales from retailers, also fell on high turnover. Fairfax lost 4.2 percent and Seven West 3.8 percent.

The benchmark S&P/ASX 200 index fell 24.1 points to 4,490.7, according to the latest data.

New Zealand's benchmark NZX 50 index fell 0.4 percent to 3,409.6.

Market participants were bracing for a tough profit reporting season in August.

"Investors are expecting poor outlook commentary. That's evident by the amount of shorting of stocks in the consumer space," said Simon Bonouvrie, portfolio manager at Platypus Asset Management.

"Valuations are attractive but they can always become cheaper. I think there is still a bit to go on the downside but I'd be waiting with a fishnet to scoop up some stocks," he said.

Banks took a hit, too, on the back of the weak outlook for consumer spending, led by a 1.8 percent fall in Westpac Banking Corp.

Global miner Rio Tinto recouped early losses to end flat at A$80.95 after it posted a 12 percent rise in second-quarter iron ore production versus a year ago and said its Australian coal operations were recovering from flood-related disruptions but also warned of cost pressures.

Copyright Reuters, 2011