Australian shares recoup early losses as G20 soothes

Under pressure from investors to show action, finance ministers and central bankers from the Group of 20 economies said they would take all steps needed to calm markets and said central banks are ready to provide liquidity as needed.

"I think the valuations are fairly low, but we could well see the momentum from this carry through to the afternoon," said Colin Whitehead, an analyst at Fat Prophets.

"The huge weight of negative sentiment that has got the market to where is at present, that isn't just going to disappear in a puff of smoke based on some fairly generic statement coming out from policy makers," Whitehead said.

The S&P/ASX 200 index traded at 3,952.00 in early afternoon, coming off lows after falling 2 percent in early trade. The benchmark fell 2.6 percent on Thursday to its lowest close in 26 months on Thursday.

"What we need to see is a unified policy and actual action as opposed to simply statements about intent," Whitehead added.

Global miner Rio Tinto eased 1.6 percent while BHP Billiton fell 1.2 percent, both on concerns about slowing demand for minerals. Fortescue Metals lost 7.5 percent to A$5.05.

Gold producer Newcrest Mining , usually a safe haven asset, fell 2.5 percent to A$36.67 after gold futures posted their steepest losses in a month.

"Anything sort of leveraged to the global growth story is being sold off hard because people are questioning whether or not we are going to see a global recession," said Cameron Peacock, market analyst IG Markets.

Australia's four major banks fared better than most with Commonwealth Bank of Australia up 2 percent to A$43.73 after the central bank said the banking sector was in better shape than before the 2008/09 crisis. New Zealand's benchmark NZX 50 index slipped 1.1 percent to 3,275.2 in morning trade.

STOCK ON THE MOVE

Foster's Group stocks were flat at A$5.26, after brewing giant SABMiller agreed to buy it for a sweetened price of A$9.9 billion ($10.2 billion) on Wednesday.

Australian farm chemicals maker Nufarm stocks were up 0.2 percent. The company announced it was in advanced talks to refinance a A$600 million syndicated bank debt facility which matures in December 2011.

Copyright Reuters, 2011