AFTERNOON REPORT- CLOSING
(4.30pm AEST)

The Australian share market fell to a two year low today, as global markets were heavily sold off on fears of a renewed global economic slowdown. US markets posted their biggest one day decline in two and a half years overnight while the local market had its worst one day fall since January 2009. The All Ordinaries Index (XAO) shed 183.2pts or 4.2pct to 4169.7. The All Ords closed at a level of 4097 on the 24th July 2009.

Adding to the sell-off were comments from the central bank, released in the RBA's Statement on Monetary Policy. The Reserve Bank has changed its interest rate assumptions and is now expecting no change in rates over the next two years. The RBA also reduced near-term economic growth forecasts, but indicated it expects the economy to rebound sharply in mid 2012, growing at a 4.5pct annual rate. The Reserve Bank monetary policy statement was finalised yesterday, just before the sell-off on global share markets.

Every sector finished in the red today, with mining and energy players amongst the biggest losers as investors not only bailed out of equities but also commodity markets. The energy sector fell 5.6.pct while the materials sector was down 5.2pct.

Shares in index leader BHP Billiton fell 5pct to $38.05, Rio Tinto (RIO) was off 6.4pct to $71.70 and iron ore miner Fortescue Metals Group (FMG) was lower by 6.4pct to $71.70.

In the financial sector, Macquarie Group (MQG) eased by 7.2pct to $23.25 while the ANZ (ANZ) slumped 3.6pct to $19.10 and the National Australia Bank (NAB) eased by 4pct to $21.77. Westpac (WBC) held up better, down 2.5pct to $19.27, while the Commonwealth Bank (CBA), which reports full year earnings next week, closed down 2.7pct to $46.26.

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Defensive stocks were not immune to the sell-off. Telstra (TLS) closed down 2.4pct to $2.89 while Woolworths (WOW) lost 2.7pct to $25.49 and Cochlear (COH) fell 1.3pct to $66.86.

Retailer David Jones (DJS) saw 5.7pct wiped off its share price, DJS closing at $2.79, while outdoor wear retailer Kathmandu, which gave an upbeat outlook to the market earlier this week, fell 5.3pct to $1.70.

Airline stocks were also sold off, Virgin Blue Australia (VBA) shed 7.3pct to $0.255 and Qantas (QAN) was down 3.4pct to $1.69.

On the market overall, a total of 4.47 billion shares were traded, worth $9.75 billion. 63 were up, 1414 were down and 171 were unchanged. At 4pm AEST on the ASX 24 the futures index was at 4070, down 172 pts.

Across the Asian region falls were as severe. Japan's Nikkei index shed 3.7pct while the Taiwan market lost 5.6pct and Hong Kong's Hang Seng index shed 4.6pct.

The key focus for global share markets is now the non-farm payrolls or employment data coming out of the US tonight. Economists are tipping that a modest 85 000 jobs were created in the US economy in July. Anything less than this figure could trigger more panic driven selling, while a figure larger than estimates could prompt a relief rally.

At 4pm AEST the Dow Futures index was pointing to a modest fall of 32 points or 0.3pct during tonight's session.

In Europe, Italian GDP or economic growth figures are released.

The Australian dollar ended the day's session at US104.44c, £0.6421 and €74.14.

(From Juliette Saly, CommSec Market Analyst)

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