Australia shares fall 1.6pc on Europe debt worries

SYDNEY: Australian stocks fell 1.6 percent on Monday, ground down by persistent worries on Europe's debt crisis after a meeting of EU finance ministers failed to make major progress and Greece did not announce any new austerity measures.

Stocks were down across the board, but Australia's big four banks were among the hardest hit, with Westpac down 2.8 percent to A$19.36.

"I was actually expecting it to be a little more positive, so I guess it's just the lack of progress in Europe and the realisation that Greece is probably going to default at some point," said Colin Whitehead, analyst at Fat Prophets

"Until the market has confidence that policy is in place to actually handle that default, I guess we are still looking at pretty weak sentiment," he added.

The benchmark S&P/ASX 200 index slid 66.9 points, or 1.6 percent, to 4,082.5 by 0051 GMT.

New Zealand's benchmark NZX 50 index fell 0.6 percent to 3,273.8.

On a technical basis, the rally last week from the 3,998 low in the ASX 200 will find initial resistance at 4,177 which is the 50% retracement of the 4,355-3,998 move, according to Reuters foreign exchange analyst Krishna Kumar.

"The rally on Wall Street could start to falter soon with the S&P showing signs of failure at the top end of its range of 1,125-35 to 1,220-35. This will obviously serve to stunt any further rallies on the ASX 200," he said.

Australia's Macarthur Coal eased 0.4 percent to A$15.93 after Peabody Energy and ArcelorMittal extended their $5.2 billion takeover bid for the coal miner until Oct. 14.

Gold miner Newcrest bucked the trend and headed higher to A$38.74 at 0152 GMT, on the back of stronger gold prices, as investors sought a safe haven in bullion.

STOCKS ON THE MOVE

Ports and rail group Asciano fell 3.1 percent to A$1.54 in morning trade. Australian Financial Review newspaper said the company was holding talks with coal miners in the Galilee Basin over potentially developing infrastructure in the area.

Brewer Foster's was down 0.6 percent to A$4.93 in morning trade, with suitor SABMiller expected to release details of its $10 billion takeover bid for the company in the next two weeks.

QBE Insurance fell 2.4 percent to A$12.71 in morning trade.

Rare earths firm Lynas Corp fell 4.1 percent to A$1.51.

Cochlear bucked the morning trend to rise 3.4 percent to A$52.92.

Copyright Reuters, 2011