Sovereign downgrades depress stocks

Fitch has downgraded Greece's long-term debt rating from A- to BBB , while Standard & Poor's has downgraded Spain's long-term debt rating from AAA to A-.

Both countries are heavily indebted and the agencies say the governments have not adjusted spending policy to deal with their deficits.

European markets closed lower on Wednesday in response to the announcements but Wall Street eventually sloughed off the issue.

Yesterday the Australian sharemarket closed lower again despite better than expected unemployment figures for November.

The benchmark S&P/ASX 200 Index fell 31.2 points, or 0.67 per cent, to 4606.7.

The Bureau of Statistics reported that the unemployment rate was at 5.7 per cent, down 1 percentage point from October, with 31,200 new jobs added in the month.

The dollar leapt half a US cent on the data, ending higher at US91.22?.

"The jobs market is providing clear evidence that momentum is building in the economy," Commonwealth Bank senior economist Michael Workman said in a note to clients.

"It is a favourable development for retail spending in coming months as rising hours worked and more full-time jobs lift confidence and cash flows. Retail spending has been sliding sideways since mid-year and the extra jobs should break this trend."

The S&P/ASX 200 was dragged down by declines in BHP Billiton, down 59? at $39.96, and Rio Tinto, which lost $1.10 to $69.80.

Gold continued to slide. At the Sydney close, it was down $US5.59 an ounce at $US1128.13.

Among the banks, NAB improved 4? to $28 and Westpac picked up 18? to $23.77 but Commonwealth lost 35? to $52.51 and ANZ dipped 1? to $21.50.

The information technology index underperformed all the other indices, dragged down by Computershare, which closed at $10.60, down 18?. The stock has lost 37? since Monday.