Stocks marked back as sentiment sags

The S&P/ASX 200 Index was down 39.4 points, or 0.92 per cent, at 4267.4.

CMC Markets chief market strategist Michael McCarthy said it was hard to ascertain whether any one factor was responsible for yesterday's reversal. The market had been trading in the upper end of its recent range, so some investors might have decided to take profits.

"A lot of people are talking about the leadership struggle, but I would have thought that for the moment it's dealt with," he said. "I can only think that some people are concerned that it might re-emerge very quickly."

Mr McCarthy said Asian markets had performed fairly strongly yesterday, so there was no negative lead there.

BHP Billiton paying its dividend was certainly a contributing factor, but BHP's share price fell by more than the size of the dividend.

Mr McCarthy said that although three of the banks had ratings downgrades on Friday, they had performed better than the broader market yesterday.

National Australia Bank dipped 3? to $23.49, ANZ retreated 12? to $22.08, Westpac slipped 7? to $20.71, and Commonwealth Bank eased 26? to $49.44. On Friday, the Fitch ratings agency said it had downgraded their ratings by one notch to AA- from AA due to their dependence on wholesale funding markets.

In the resource sector, BHP Billiton finished down 72? at $35.82, Rio Tinto shed 69? to $67.40 and goldminer Newcrest was $1.04 weaker at $33.51.

Shares in oil refiner Caltex Australia lost 8? to $12.90 after it reported an $852 million loss for calendar 2011.

Oil and gas producer Roc Oil edged up 1? 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 other stocks, KFC and Sizzler restaurants operator Collins Foods lost 5? to $1.18 after it said trading conditions remained difficult.

Woodchipper Gunns picked up 1? to 18.5? despite posting a larger first-half loss and saying trading conditions would remain tough as long as the dollar stayed strong.

Spot gold finished at $US1774.50 an ounce down $US2.53 from Friday's close and last night in Europe had slid to $US1767.88.