Stocks sharply lower as financials wilt

The Australian share market closed sharply lower today as economic uncertainty and high oil prices pulled most stocks back.

At the close, the benchmark S&P/ASX200 index had fallen 138.1 points, or 2.53%, to the two-month low of 5329.2, while the broader All Ordinaries had lost 128.7 points, or 2.31%, to 5433.2.

Labour force figures for May appear to confirm a slowdown in the economy.

Economists had expected employment to rise by 13,500, but the Australian Bureau of Statistics announced a surprising fall of
19,700 (0.2%) in May.

ABN Amro Morgans private client adviser Peter Knight said industrial stocks - or anything exposed to high oil prices or the United States economy - lost ground today.

The major banks were also weaker.

"It's just sentiment really ... it's economic uncertainty, moving forward,'' Mr Knight said.

Mr Knight said the heavy fall of investment firm Babcock and Brown was the story of the day as speculation mounted that hedge funds were targeting the stock and selling it off.

Babcock & Brown shares plummeted 27.5%, or $2.62, to $6.90, while shares in Babcock & Brown Power fell 31%, or 40.5 cents, to 90 cents. Babcock & Brown Infrastructure fell 13.6%, or 13.5 cents, to 85.5 cents.

In the resources sector, global miner BHP Billiton was down $1.64 at $41.80. BHP Billiton will have to cut its nickel production after bringing forward the rebuild of its Kalgoorlie nickel smelter furnace in Western Australia.

Rio Tinto was off $2.22 at $129.88.

Oil and gas producer Woodside Petroleum was off 36 cents at $61.22, Santos dipped 22 cents to $21.68, but Oil Search added 20 cents to $6.05.

The price of oil surged overnight more than $US5 dollars per barrel to $US136.38.

Among banking stocks, Commonwealth Bank sagged $1.23 to $41.61, Westpac retreated 78 cents to $21.47, ANZ shed 83 cents to $19.57, and NAB fell $1.16 to $27.64.

On Wall Street overnight, the Dow Jones industrial average fell 205.99 points to 12,083.77.

In the gold sector, Newmont was steady at $5.00, Newcrest gave away $1.65 to $26.98 and Lihir eased 2 cents to $2.86.

The price of gold in Sydney at 4.29pm was $US872.50 per fine ounce, down $US2.30 on yesterday's close of $US874.80.

Among retail stocks, Billabong International declined 49 cents to $11.52 as it snapped up US surfing and skate gear retailer Quiet Flight to strengthen its presence on the US mainland.



Wesfarmers, which owns Coles, descended 43 cents to $38.09 and Woolworths lost 90 cents to $26.25.

In the media sector, News Corp was off 41 cents to $18.73 and its non-voting stock fell 35 cents to $18.10.

Consolidated Media worsened 8 cents to $3.18 and Fairfax was 11 cents lower at $3.09.

Telstra was 5 cents poorer at $4.54 and Optus-owner Singapore Telecommunications slipped 2 cents to $2.79.

Among other stocks, coal-to-liquids company Linc Energy rose by 55 cents to $4.65 on plans to merge with oil and gas explorer SAPEX in a deal valuing the target at $104 million. SAPEX was up 1.5 cents to 71 cents.

Proto Resources & Investments picked up three cents at 18.5 cents as it said it would begin a feasibility study into the development of the Barnes Hill nickel project in Tasmania, which could cost up to $90 million to bring online.

Iron ore explorer Iron Road made a flat debut on the Australian stock exchange today, finishing at 28.5 cents.

Construction firm Leighton Holdings was down 94 cents at $49.76 as a joint venture involving Leighton was awarded an $835 million contract to build the Trump International Hotel and Tower in Dubai.

The top-traded stock by volume was IM Medical, with 97.2 million shares worth $2.71 million changing hands. IM Medical was 0.6 cents lower at 2.2 cents.

Preliminary national turnover was 1.93 billion shares worth $6.46 billion, with 965 stocks down, 322 up and 328 unchanged.

On the Sydney futures exchange, the June share price index futures contract was 114 points lower at 5346 on a volume of 28,588 contracts, according to preliminary calculations.