Political turmoil in Canberra and dividend payouts from some of the sharemarket's biggest players triggered a fall in the local bourse yesterday, with losses in every industry sector except utilities.
The benchmark S&P/ASX200 fell 39.4 points, or 0.9 per cent, to 4267.4 points. The broader All Ordinaries fell 34.5 points to 4354.5.
The sharemarket shed 20 points immediately after news that the Prime Minister, Julia Gillard, beat her challenger, Kevin Rudd, in the caucus ballot for the role of Prime Minister, by 71 points to 31.
The margin wasn't wide enough to discount any future challenges by Mr Rudd, and that unsettled markets said Goldman Sachs analyst Richard Coppleson.
But some fund managers said there was little difference between the two.
"From the point of view of overseas investors, they view Gillard and Rudd as interchangeable there are no major policy differences," said Ivor Ries, the head analyst at E.L. & C. Baillieu Stockbroking.
Miners led the market lower, with the gold sector falling 2.1 per cent and the materials sub-index falling 1.5 per cent. Energy dropped 1.2 per cent and financials lost 0.7 per cent.
The fall was aided by a slew of corporate dividend pay-outs. Overall, dividend payments took 14 points off the market.
Meanwhile, the Australian dollar slipped three-quarters of a US cent after the leadership vote, but Easy Forex currency trader Tony Darvall said the spill had little real impact on currency markets, with demand for the euro and the British pound putting more pressure on the dollar.
"It wasn't a major effect but there was definitely no positive from it," he said.
In the resources sector, global miner BHP Billiton was down 72? at $35.82 and Rio Tinto had shed 69? at $67.40.
Gold stocks fell 2.1 per cent, pulled down by a 3 per cent slide in Newcrest after Australia's biggest gold miner was downgraded yesterday morning by JPMorgan. It ended the day $1.04 weaker at $33.51.
The oil refiner Caltex Australia dropped 8? to $12.90 after reporting an $852 million loss for calendar 2011.
The oil and gas producer ROC Oil edged up one cent to 40? after it booked its first annual profit since 2005.
Fellow oil and gas producer Beach Energy fell 9.5? to $1.67 despite returning to first-half profitability.
Among the major banks, National Australia Bank was 3? lower at $23.49, ANZ retreated 12? to $22.08, Westpac dipped 7? to $20.71, and Commonwealth Bank eased 26? to $49.44.
On Friday, the Fitch ratings agency said it had downgraded the ratings of three of Australia's big four banks one notch, due to their partial reliance on wholesale funding markets.
Commonwealth Bank, Westpac and National Australia Bank were lowered to AA-, from AA, to reflect their weaker funding profile.
Shares in the surfwear company Billabong International gained 4.8 per cent to $3.05, after it rejected a $765 million takeover offer from the private equity firm TPG as too low, but said it was still talking with the suitor. The offer is worth $3 per share.
Steelmakers continued to benefit from a re-rating of the sector after recent earnings reports, with BlueScope Steel up 3.8 per cent and smaller rival OneSteel up 7.3 per cent.
Equatorial Resources finally accepted South African miner Exxaro's offer for African Iron, agreeing to sell its 20.5 per cent stake, which clears the way for the offer to be increased to 57? a share, or $286 million.
The news lifted African Iron shares by 2.7 per cent, while Equatorial eased 1.2 per cent.
Among other stocks, KFC and Sizzler restaurants operator Collins Foods lost 5? to $1.18 after it said trading conditions remained difficult.
Preliminary national turnover was 1.99 billion shares worth $4.19 billion, with 573 stocks down, 484 up and 380 unchanged.
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