AUSTRALIAN investors wiped more than 1 per cent from the sharemarket following a heavy selloff in Europe after the European Central Bank failed to deliver a hoped-for knock-out blow to the region's banking crisis.
Share and bond prices fell sharply in Europe after ECB president Mario Draghi failed to reassure investors at Thursday's ECB policy meeting that he was ready to act immediately to support the region's economies, and keep the eurozone from breaking up.
A week after Dr Draghi suggested European officials would do "whatever it takes", his failure to intervene directly in the European bond market sparked heavy losses.
European stocks tumbled 3 per cent, and US stocks fell the most in a month, with the Dow down 0.7 per cent, as bond yields soared in Italy and Spain. The "watch-and-see" approach had left the market in limbo, with many hoping for a concrete bond buying program to drive up prices and so reduce borrowing costs in Spain and Italy.
In Australia, the sharemarket dropped 1.1 per cent, dragged down by big losses in the mining sector. The S&P/ASX 200 Index dropped 48 points, or 1.1 per cent, at 4221.5.
China's central bank said it would pursue "prudent" policy after the US Federal Reserve a day earlier refrained from adding fresh stimulus.
A US jobs report issued last night was expected to show that employers did not add enough workers in July to trim an 8.2 per cent unemployment rate.
Data from the Australian Securities Exchange showed the value of ASX-listed stocks, as measured by the All Ordinaries Index, rose 3.7 per cent last month.
The performance was below rises in other major markets, including Germany (up 5.5 per cent) and Singapore (up 5.5 per cent), but stronger than Hong Kong (up 1.8 per cent), the US (up 1.3 per cent), Britain (up 1.2 per cent) and Japan (down 3.5 per cent).