Aussie stocks fall banks lead on economy worry

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By Geraldine Chua

SYDNEY, July 10 (Reuters) - Australian shares fell 1.5 percent on Thursday, with financials such as Westpac Banking Corp (ASX: WBC.ax) leading losses on growing concerns about credit markets and slowing economic growth.

Conglomerate CSR Ltd (ASX: CSR.ax) slumped as much as 16.8 percent to log its biggest one-day fall in over a decade after it gave an earnings outlook that was well below market forecasts [ID:nSYD6298].

Dealers said equity markets face several headwinds, including rising inflation, slowing company earnings and persistent credit concerns, which will continue to dampen investors' appetite for stocks.

"There is not a lot buying at the moment because there is so much fear on the ground," said George Kanaan, head of institutional sales at UBS.

"A lot of stocks look cheap at the moment but everyone is scared to go in and buy them too quickly," he said, adding sentiment would only improve on a sustained fall in oil prices.

The benchmark S&P/ASX 200 index JO fell 74.5 points to 4,937.4, based on the latest available data, after falling to its lowest level since July 2006 earlier in the session.

The index has dropped 22.1 percent since the start of the year after rising 11.8 percent in 2007.

New Zealand's benchmark NZX-50 index .NZ50 fell 2 percent, or 64.90 points, to 3,112.56. The most heavily weighted stock, Telecom Corp of New Zealand (NZX: TEL.nz) , lost nearly 4 percent to NZ$3.37.

BANKS SOLD

Financial firms resumed their falls after a brief respite in the previous session, on persistent concerns about credit losses.

The big banks mostly fell over 2 percent, with Westpac shedding 3.2 percent to A$19.07 and Commonwealth Bank of Australia Ltd (ASX: CBA.ax) down 2.3 percent at A$40.55.

Macquarie Group MQG, Australia's top investment bank, fell 1.5 percent to A$48.11.

CSR finished down 14.7 percent at A$1.97 after it said it expected earnings before interest and tax (EBIT) to rise over 5 percent in its current fiscal year, short of analysts' forecasts for 13.8 percent growth.

CSR shares earlier fell to a four-year low of A$1.92, posting its largest single-day percentage drop since October 1987.

Bucking the trend, coal miner Macarthur Coal Ltd (ASX: MCC.ax) climbed 11.8 percent to A$17.10 after it lifted its fiscal 2008 net profit by as much as 34.3 percent, citing higher coal sales and shipments [ID:nSYD149576].

Incitec Pivot Ltd (ASX: IPL.ax) , Australia's biggest fertiliser maker, gained 5.1 percent to A$173.00.

Credit Suisse, which has an outperform rating on the firm, said it sees a number of share price catalysts for Incitec in the near term, including a production resumption at its Phosphate Hill fertiliser plant in Queensland and a possible share split. ($1=A$1.05) (Editing by Jonathan Standing)

More Quotes and Company Information:COMMONWEALTH BANK OF AUSTRALIA. (ASX: CBA.ax)CSR LIMITED(ASX: CSR.ax)INCITEC PIVOT LIMITED(ASX: IPL.ax)MACARTHUR COAL LIMITED(ASX: MCC.ax)WESTPAC BANKING CORPORATION(ASX: WBC.ax)Telecom Corporation of New Zealand Limited(NZX: TEL.nz) ... read full article
Thu 10th July 2008 - 04:35pm