SYDNEY: Australian shares dropped 1.4 percent on Friday after the European Central Bank doused hopes of dramatic action on its part to arrest the euro area's debt crisis, and as investors waited for key inflation data out of China.
Investors are betting on a fall in the Chinese CPI below 5 percent when data is released around 0130 GMT, which would bode well for China's economic prospects in 2012, and demand for commodities produced by Australian miners.
"If we see inflation being addressed, it signals there is the capacity in China to start easing and that will be positive for commodities," said City Index analyst Peter Esho.
Top miners were lower on Friday ahead of the Chinese data as news from Europe continued to weigh on risk assets globally.
European Union leaders agreed on new fiscal rules enshrining tougher budget discipline on Thursday, an EU official said, after the European Central Bank earlier spooked financial markets by discouraging expectations that the bank would massively step up buying of government bonds.
BHP Billiton was down 2.6 percent and Rio Tinto fell 3.0 percent.
The benchmark S&P/ASX 200 index lost 58.8 points to 4,221.9 at 0004 GMT. The index slipped 0.3 percent on Thursday. New Zealand's benchmark NZX 50 index fell 0.4 percent to 3,254.9.
STOCKS ON THE MOVE
Australia's Extract Resources saw its shares rise 5.4 percent to A$8.53 after its top shareholder Kalahari Minerals agreed to a proposed offer from China Guangdong Nuclear Power Corp (CGNPC) worth $990 million.
Australian wealth manager AMP Ltd shares jumped as much as 4.6 percent after saying Mitsubishi UFJ Trust and Banking Corp will buy a 15 percent stake in the funds management unit for A$425 million ($434 million).
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