AUSTRALIAN shares broke their two-day winning streak to fall 1 per cent as wary investors booked profits amid more gloomy data from Europe.
The market slipped back following a lacklustre German bond auction and fresh concerns about the state of Europe's banks.
Energy, resources and industrial stocks led the market lower after two days of stellar gains driven by a jump in commodity prices. Even traditionally defensive sectors, including telecoms and healthcare, suffered amid the sell-off.
"It all seems a case of old-fashioned profit-taking," the Commsec chief economist, Craig James, said. "Investors, if they see the sharemarket rise in the current environment, they're going to lock in those gains as they go along."
At the close yesterday, the benchmark S&P/ASX200 index was down 45.1 points at 4142.7, while the All Ordinaries index was down 42.9 points at 4196.6.
Financial stocks shed 1.1 per cent after more record deposits with the European Central Bank showed how little confidence investors have in the region's financial sector, despite measures by the central bank and policymakers.
News that UniCredit, Italy's biggest bank, had to offer shares at a massive 43 per cent discount to get a ?7.5 billion ($9.4 billion) capital raising program sent bank shares tumbling in Europe and the US.
"The European banks have been showing for a little while now that they're nervous of lending to each other, and that's likely to continue," a Burrell Stockbroking adviser, Jamie Elgar, said.
One of the few Australian stocks to buck the trend was Transpacific Industries. It rose 0.6 per cent to 80.5?, despite news that the founder of the waste management company had launched legal action against his old business claiming damages of $4.6 million.
Dealers will now be looking to the US private sector jobs report and non-farm payrolls for more direction, although any bump in the road is likely to stoke another bout of profit-taking.
"There's no confidence that if you get one good set of figures the one after will be good as well," the Intersuisse director of equities, Andrew Sekely, said. "This is very much a day-to-day trading environment."
On the exchange, 1.2 billion shares were traded with a value of $2.7 billion.