FEARS that Israel might bomb Iran and concerns about a slowdown in Chinese growth were enough to convince investors to pull money from the sharemarket yesterday.
Energy and materials stocks again weighed heavily, as copper slipped almost 1 per cent amid worries of a slowdown in demand from China. Mining stocks dropped, with BHP Billiton down 81?, or 2.3 per cent, to $34.58, and Rio Tinto shedding $1.47, or 2.3 per cent, to $63.62.
The materials sub-index which includes producers of agricultural commodities, fertilisers, paper and forestry products, and chemicals and building materials had its worst day since December 19, losing 2.3 per cent. The only sector to avoid losses was the information technology sector, which rose by 1.2 per cent.
"It's seen a change in sentiment," said Wingate Asset Management chief investment officer Chad Padowitz. "We've definitely seen companies geared to global growth taking somewhat of a hit, like oil and commodity companies.
"Where the market's been very resilient and quite strong over the last couple of months, there is certainly [some] real weakness starting to be shown in commodity companies."
Concerns that Israel has run out of patience and could soon start bombing Iranian nuclear sites kept global equity markets weaker. The benchmark S&P/ASX 200 Index was down 58.3 points, or 1.37 per cent, at 4204.7.
The dollar lost more than US1? after the Reserve Bank kept the cash rate steady at 4.25 per cent. RBA governor Glenn Stevens said the monetary policy setting was "appropriate" for the moment. Economists said that, despite some of the central bank's more upbeat observations about the European financial system, it appeared to hold a bias towards cutting rates, with much depending on domestic economic conditions.
Attention will now turn to ANZ's independent rate decision on Friday.
At 5pm, the dollar was trading at $US1.0627, down from $US1.0708 on Monday.
Currency strategists suspected more was behind the drop than the RBA decision. "It was a bit perplexing," said Andrew Salter, a foreign exchange strategist at ANZ. "A couple of headlines might have been factors. One was regarding the Iranian conflict . . . the other comments from Chinese central bank officials that they had confidence in Europe."
ANZ fell 11? to $22.09, Commonwealth Bank gave up 51?, to $48.58, and National Australia Bank shed 5?, to $23.48.