Australia shares slide 3.8pc as global turmoil bites

"The market is taking no prisoners, it's hard to find any stock that's looking like going up" said Michael Heffernan, senior client advisor with Austock Group.

"Clearly, it's just a knee-jerk reaction to what's going on," Heffernan said. "We're going down simply on the fear that Italy can't pay its debts."

The S&P/ASX 200 index slumped 162.4 points to 4,114.1 at 1000 GMT, after earlier trading at a two year low of 4097.5.

That followed a 1.3 percent fall on Thursday, with total losses for the week about 7.7 percent.

Australia's 4 percent fall matched the drop on global markets as investors stampeded out of stocks and into the safety of cash and government debt, on fears the euro zone debt crisis is accelerating and a weak US economy could lead to a global recession. For more see

Australian Treasurer Wayne Swan attempted to soothe local market fears by saying growth in Asia-Pacific was strong despite the European debt crisis, although he warned the region was not immune to the turmoil.

Red ink dominated the board, with most of Australia's heavyweight stocks belted.

Global miners BHP Billiton and Rio Tinto each fell around 4 percent while Fortescue fell 6 percent.

Banks were likewise hit, with top lender National Australia Bank down 4.1 percent and Westpac 5 percent lower.

New Zealand's benchmark NZX 50 index Fared slightly better, down 2.5 percent to 3,294.2.

At 0055 GMT all of the stocks in the top 50 index were lower, except for two that were flat. The worst performers were retailer Kathmandu, down 7 percent to NZ$2.12, and trans-Tasman food group Goodman Fielder down 6.1 percent to NZ$1.08.

Copyright Reuters, 2011