Australian shares fell 1.2 percent on Friday to recorded their biggest weekly drop in over nine months as Middle East unrest, Europe's debt crisis and China's surprisingly weak trade data led a flight to safety. The benchmark index, which only last week breached a key chart support level, came close to the 200 day moving average and drew support from it to cut some losses in late trade.
Stocks fell across the board as global markets were unnerved by violence in Saudi Arabia, one of the world's most important oil producers. The benchmark S&P/ASX 200 index fell 54.9 points to 4,644.8, its lowest close since December 1, 2010. It fell as low as 4,630.7 during the day and for the week, it lost 4.5 percent.
"It is very much a 'risk-off' trade. The word out there is exit anything risky," Matt Lewis, a dealer at CMC Markets said. Traders said after a long period of a one-way trade when the market just went up, investors were rattled by global events and bailed out of risky sectors.
They pointed to the fact volumes on sell-off days were heavy, indicating the weak sentiment. Volumes on Friday were nearly 1.5 times the 90 day average. Concerns deepened the Middle East crisis will hurt oil supplies for an extended period and China's highest trade deficit since February 2004 hurt metal prices and investors were worried that demand will wane.
Global miners BHP Billiton fell 1 percent and Rio Tinto slipped 2 percent. No 4 lender Australia and New Zealand Banking Group led banks lower with a 1.8 percent drop as investors fretted Europe's debt crisis will push up cost of funding for Australia's banks.