INVESTORS had their eyes trained on Europe all week, with hopes its leaders would come up with a "fiscal compact" to restore confidence in the region.
Officials from the European Commission held a bizarre press conference yesterday morning in Brussels, saying they would reassess the adequacy of the euro zone's bailout fund in three months.
"It was really weird. Why hold a press conference in the early hours of the morning? They didn't seem to have anything too appealing to announce," the senior currency strategist at Westpac, Sean Callow, said. "The markets weren't very thrilled about it."
The local market lost ground yesterday, finishing the week well in the red. The benchmark S&P/ASX 200 Index shed 77.7 points, or 1.82 per cent, to 4203. It was down 2.73 per cent over the week.
Financial and energy stocks led the way down, but all sectors lost ground. BHP Billiton fell $1.13, or 3.1 per cent, to finish at $35.86, while rival Rio Tinto lost $2.35, or 3.6 per cent, to $63.74. Woodside Petroleum fell $1.01 to $31.89, after oil prices dipped overnight.
Wealth manager AMP initially gained ground after reports that Japan's Mitsubishi UFJ Financial had paid $425 million for 15 per cent of AMP Capital Investors.
AMP said the sale would give it a foothold in Japan and its share price shot up 30? to $4.52, before falling back to close 2? lower on the day at $4.30. The Australian dollar lost US1? over the week to finish on $US1.01.
Richard Grace, the chief currency strategist at Commonwealth Bank, said the currency had held up well despite Europe's debt woes.
"Commodity prices aren't collapsing, hence the Australian dollar's not," he said. "The only reason you'd get really bearish on the Australian dollar is if you thought that global economic activity would collapse, but it shouldn't unless Asia starts to slow significantly."
The big four banks lost ground after Reserve Bank governor Glenn Stevens warned that reforms of the global financial system could be taken too far.