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Commodities slump sparks miner selloff

THE sharemarket fell more than 1 per cent to a two-year low yesterday, pulled down by investors selling out of miners and energy companies after commodity prices slumped.

THE sharemarket fell more than 1 per cent to a two-year low yesterday, pulled down by investors selling out of miners and energy companies after commodity prices slumped.

Goldminers led the tumble after the price of gold dropped by more than $US150 at the weekend.

Stocks started the day in positive territory following German Chancellor Angela Merkel's hour-long television interview, which renewed talks of a possible Greek bailout.

But within a few hours the local market began shedding value, with the benchmark S&P/ASX 200 Index falling 39.3 points, or 1 per cent, to 3863.9.

RBS Morgans Ipswich manager Tony Russell said overseas investors had sold out of miners and energy companies after commodities' weak performance at the weekend.

The materials and energy sectors plummeted 3.9 per cent.

"A lot of money flowed into commodities as a safe haven in the last 12 months and maybe there's some profit taking . . . we've seen a selloff there and the ongoing effect of that is being reflected in [major material stocks]," he said.

Gold slumped late on Friday because of the renewed strength of the US dollar and talk of hedge fund liquidation wrecking its haven status.

Gold closed in Sydney at $US1566.82 an ounce, down $US178.86 from Friday's $US1745.68.

Australia's biggest goldminer, Newcrest, also tumbled $3.24, or 9 per cent, to $32.86, and was the worst performer among the top 50 companies.

Rio Tinto shed $2.45, or 3.9 per cent, to $60.20 and BHP Billiton fell 60?, or 1.74 per cent to $33.95.

Rare-earth explorer Lynas Corporation was the worst-performing stock on the S&P/ASX 100, plummeting 17.1 per cent to 87.5?. The best performer on the same index was James Hardie Industries, which gained 5.52 per cent to $5.73.

Energy stocks also slipped after world oil prices slumped. Santos fell 45?, or 4.15 per cent, to $10.40 and Woodside Petroleum lost $1.57 to $29.80.

Mr Russell said trading volumes were moderate, reflecting a lack of buyers.

The financial sector recovered slightly from a major selloff last week to close 0.75 per cent up, after a rebound in European bank stocks on Friday. All the big banks rose in value, with Westpac strongest, up 2.46 per cent at $19.19.

Burrell Stockbroking adviser Jamie Elgar said he expected volatility to continue in coming weeks, with any rise in the market tentative on continuing uncertainty.


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