Shares slip as optimism over Europe fades

AUSTRALIAN shares slipped 0.8 per cent amid low volumes on resurfacing fears of Europe's debt crisis and ahead of the start of the US earnings season.

AUSTRALIAN shares slipped 0.8 per cent amid low volumes on resurfacing fears of Europe's debt crisis and ahead of the start of the US earnings season.

The market still managed to gain more than 1 per cent for the week, snapping a four-week losing streak, after stronger economic data from the US and Europe encouraged investors earlier in the week.

The earlier optimism wore off on the realisation that the debt problems of Europe were likely to persist. European bourses closed lower and the euro tumbled on Thursday night after a rise in borrowing costs at France's latest government debt auction sparked concerns over the health of the region's second-largest economy.

"There are the usual concerns about the European banking and debt situation," the EL & C Baillieu Stockbroking director, Richard Morrow, said. "The reflection of all that is equities are pretty soft."

At the close yesterday, the benchmark S&P/ASX 200 index was down 34.2 points, or 0.8 per cent, at 4108.5, while the broader All Ordinaries index was down 32.1 points, also 0.8 per cent, at 4164.5. The All Ords added 1.3 per cent for the week.

Trading volumes continued to be low, with 1.13 billion shares worth $3.03 billion changing hands. Almost three shares fell for each one that gained.

Materials stocks pushed lower after a sell-off in commodities overnight. BHP Billiton shed 1.6 per cent to $35.24 while Rio Tinto lost 0.5 per cent to $62.52.

Goldminers were among the stocks which bucked the trend. Newcrest added 25?, or 0.8 per cent, to $30.75. The spot price of gold was at $US1623.30, up $US4.05 from Thursday's local close.

Suncorp led financial stocks lower after the general insurer said it expected natural hazard costs for the six months to December to be in the rage of $360 million to $420 million. The stock lost 28?, or 3.2 per cent, to $8.42. The other general insurers also fell, with IAG losing 2.3 per cent to $2.93 and QBE slipping 0.2 per cent to $13.12.

The major banks declined, with ANZ leading the fall with a 1.4 per cent drop to $20.45.

Among the top 200, Pacific Brands was the biggest gainer, adding 2.8 per cent to 56?. Goodman Fielder was the biggest loser, falling 3?, or 7.1 per cent, to 39.5?.

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