Australian sharemarket closes with losses as miners drop - The Australian

AUSTRALIAN shares closed with sharp losses, with miners by far the worst performers, as Europe's debt woes hit commodity prices.
The benchmark S&P/ASX 200 index ended the day down 1.2 per cent at 4142.30. The Australian dollar traded at US98.92 cents.
Shares came off their worst intraday levels after HSBC's Chinese purchasing managers' index came in at 49 in December, from a final reading of 47.7 in November.
However, markets remain transfixed by Europe’s unfolding debt woes. Overnight, Italy’s borrowing costs rose to a euro-era record at a bond auction, sending the euro to an 11-month low against the US dollar. The euro traded at $US1.2991 in Asian hours, according to FactSet data.
The Italian bond auction underlined that borrowing costs are at near-unsustainable levels for some European governments, even after last week’s key summit.
European financial institutions are seeing high funding costs as well, noted Abdullah Karatash, head of US fixed income credit trading at French brokerage Natixis, and “are in a race to shed assets and reduce financing lines to corporations”.
“This has the unintended consequence of forcing many commodity players that had hedged themselves against future price increases to unwind and sell their positions, thus sharply depressing commodity prices,” he added.
Gold futures skidded nearly 5 per cent overnight, settling down $US76.20 an ounce in New York. Gold extended losses in Asian hours, trading down $US11.40 at $US1575.50 an ounce.
Barclays Capital strategists highlighted the broader risk-averse nature of markets in light of Europe's troubles and said: “Concerns about the outlook for eurozone are leading portfolios away from risk and even growth stories into safe havens.”
Along with cash and the Japanese yen, the US dollar is seen as a relative safe-haven. The US dollar index - which measures the greenback against a basket of six major currencies - traded at 80.527 in Asian hours.
Commodities are priced in US dollars and generally don’t respond well to a stronger greenback. Commodity-sector firms were by far the worst performers in Australia, with miners down 2.3 per cent.
Gold miner Newcrest Mining dropped 2.9 per cent while Perseus Mining fell 5.6 per cent and PanAust shares were down 4.1 per cent. Mineral giant Rio Tinto dropped 2.8 per cent while rival BHP Billiton fell 1.8 per cent.
Banks were also seeing some weakness, with National Australia Bank down 1.6 per cent and Commonwealth Bank shedding 1.5 per cent.