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Shares dumped as investors fear US default

INVESTOR jitters over the looming prospect of a sovereign debt default in the United States unleased a fresh wave of selling on the local sharemarket.

INVESTOR jitters over the looming prospect of a sovereign debt default in the United States unleased a fresh wave of selling on the local sharemarket.

The benchmark S&P/ASX200 index fell 73.6 points, or 1.62per cent, to 4,463.8, while the broader All Ordinaries was down 73.4 points, or 1.59per cent, at 4539.2.

The local market fell in line with major Asian bourses, with Japan's Nikkei down 1.53per cent and Hong Kong's Hang Seng closing 1.08per cent lower.

US policymakers have until August 2 to agree to lift the country's debt ceiling to avoid a sovereign default, which could have severe effects on global financial markets.

"Most share trading accounts with the big brokers are usually anchored by US treasuries - that's their security. So if you start to cut bits and pieces off it, then you're going to unstitch a lot of fabric," said Bell Potter Securities senior client adviser Stuart Smith.

A default would trigger heavy sales of US treasuries once investors knew they would not be paid back all of their investment.

The local bourse was a sea of red yesterday, with market heavyweight BHP Billiton shedding 97?, or 2.26 per cent, to $42.03 and Rio Tinto falling $1.39, or 1.68per cent, to $81.20.

Gold major Newcrest Mining lost 33? to $40.17 as the spot price of gold in Sydney fell US$9.75 to $US1614.70 ($1462.21) per ounce.

The Australian dollar's spike to a fresh record high on Wednesday meant the gold price has declined in relative terms.

Financial stocks lost ground, with the big four banks led lower by Westpac which fell 37?, or 1.76per cent, to $20.65. Shares in Macquarie Group dived $1.34, or 4.57per cent, to $27.99 after the investment bank said its first-half result for fiscal 2012 would be lower than a year earlier and a US default would hurt the business badly. "That was a big warning shock by Macquarie, that's for sure," Mr Smith said.

Wesfarmers lost 72?, or 2.39per cent, to $29.37, despite the company's annual sales revealing a 6.7per cent sales surge in its Coles supermarket chain. Myer fell 10?, or 4.12 per cent, to a record low at $2.33.

Preliminary national turnover was 2.27 billion shares worth $5.28 billion.


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