Stocks flatline on dismal support for ALP

In the latest Age/Nielsen poll, the Australian Labor Party's primary vote sank to 26 per cent the lowest in the poll's 39-year-history.

The result, which left the ALP trailing the Coalition 39-61 per cent in a two-party vote, unsettled investors.

The S&P/ASX 200 Index fell 1.5 points, or 0.03 per cent, to 4472 points.

IG Markets strategist Ben Potter said political instability in Canberra was the market's "number one" problem.

He said the ASX had tumbled 6.9 per cent since the government announced its resource rent tax in April last year, compared with a 10.9 per cent gain on Wall Street over the same period.

"Shortly after this tax was announced last year, the Australian market witnesses a significant exodus of overseas money, which has continued since," Mr Potter said.

"Worse again, there is no signs of it returning, with many offshore institutions citing perceived political uncertainty as the major reason."

The carbon tax has also weakened the Gillard-led ALP's standing in the polls.

Goldman Sachs dealer Richard Coppleson said: "These are very dire times for the ALP. Unless they can turn these polls around then the Colonel Custer's Battle of Big Horn [will] look like a picnic".

But the rocky political landscape is just another notch in the belt that investors are using to tighten their purse strings.

Mr Coppleson said too many macro events were overhanging markets, chiefly the European sovereign debt crisis and America's increased threat of defaulting if the Obama administration fails to raise its debt ceiling before August 3.

Index heavyweight BHP Billiton closed down 4? at $42.85 as investors digested the miner's $US12 billion ($A11.3 billion) acquisition of Petrohawk Energy last week, while Rio Tinto

added 24? to $81.60.

The energy sector was among the worse performers, losing 1.2 per cent. Woodside Petroleum fell 92?, or 2.4 per cent to $38.25. Santos plunged 49?, or 3.7 per cent, to $12.74 on the company's scrip bid for coal seam gas explorer Eastern Star Gas.

The retailers were mostly lower. Myer Holdings was down 4? at $2.30 and Harvey Norman was off 2? at $2.25 but David Jones finished unchanged at $3.15.

Goldminer Newcrest put on 41c to $40.41. Gold closed $US17.72 higher at $US1598.92 an ounce. Last night it was trading at $US1600 an ounce.