INVESTORS dumped commodities stocks and poured money into high-yield shares such as Telstra, sending the telco to a three-year high.
The latest turn in the European debt crisis sent the market lower on opening yesterday. The ASX 200 fell 45 points, or 1 per cent, but then bounced back somewhat.
Despite steep falls on US and European markets after Greek politicians failed to signal a way forward for the troubled country's finances, the ASX 200 closed down 34 points, or 0.8 per cent, to 4266.
Fears centred on the outlook for commodities prices and growth stocks, with shares in BHP Billiton plunging to three-year lows, leading the benchmark index down. The miner's stock closed 60? lower, or 1.7 per cent, at $33.86.
Telstra had its best day in three years, jumping as much as 11? to $3.75 in the session, before closing up 7? at $3.71.
The divergence between sectors was evident, with the resources sub-index falling 2 per cent. Telecommunications, led by Telstra, jumped 1.8 per cent. The utilities sector also gained 1.2 per cent.
"There is obviously an appetite for stocks that pay a dividend yield," Macquarie Private Wealth head of research, Riccardo Briganti, said. "But it feels to me this isn't a typical risk off - it's something more."
Mr Briganti said concerns about weakness in China, not to mention the struggles of the European economy, did not dampen demand for equities overall.
"There is still appetite for equities but not for those areas that have any sort of international exposure or leverage to the cycle," he said.
In another sign investors were altering their expectations for the market, the banking index fell only 0.4 per cent despite the credit ratings agency Moody's downgrading 26 Italian banks the night before.
Mr Briganti said if investors had been troubled by the news of ongoing European banking troubles, they would have sold local banks down more.
The shift in investor behaviour was also driven by the transition into retirement of the baby boomer generation, Arab Bank Australia treasury dealer David Scutt said.
As the generation born just after World War II moves towards retirement, its attitude to risk has changed.
"People getting close to retirement are getting completely disenchanted with the way stocks have performed over the past three years," he said.
That wariness had made some investors more selective.
"The thing we need to realise in this world is that we have got ageing people in all the major Western economies," he said. Until recently, they could depending on rising stock markets and home prices for a more comfortable retirement but that had changed.