Shares fell for a third morning to their lowest level in 10 weeks as the big banks extended yesterday's sharp falls.
At lunchtime the ASX 200 was off 38 points or 0.8% at 4604, the index's lowest level since mid-March. The defensive health and utilities sectors were alone in making gains. Hardest hit were financials -1.6%, consumer discretionary shares -1.3% and the Small Ordinaries -1%.
Shares in the big banks were all at least 1% weaker on concerns that Europe's debt crisis could lead to higher borrowing costs.
"Australian banks do rely heavily on offshore funding and the cost of that funding," RBS Morgans Ipswich manager Tony Russell told Fairfax. "If that moves up, that then squeezes their margins, which affects their bottom line pretty dramatically and might also bring in the view that they might have to raise mortgage rates as well."
Most Asian markets pared initial losses, but Shanghai deteriorated as the morning advanced. Japan's Nikkei was 0.09% weaker at the end of morning trade, Shanghai down 0.91% and Hong Kong's Hang Seng 0.2%. Dow futures were recently at -1.
Crude oil futures rallied 36 cents this morning to US $97.80 a barrel. Spot gold was 40 cents weaker at US $1.516.50 an ounce. The dollar was buying US $1.0514.
Tough old morning, with a slow grind lower making good bounces few and far between. Very mixed success at this trading desk. Decent bounce in TWE, paltry part-filled bounce in ATN. Had another go at DJS (I'm nothing if not stubborn/stupid). Also thought BBG was in oversold territory but there's nothing doing yet. Grabbed a few CAP.
