ASX: Shares fall as commodities slide, risk rally loses momentum

Australian shares fell 1.4 per cent, as a renewed commodities sell-off saw the local resources sector and major banks slip into the red.

The ASX 200 closed down 74 points at 5,111, while the broader All Ordinaries index also fell 1.4 per cent to 5,169.

The main culprits were resources stocks, which posted steep falls as commodity prices continued to give up some of their recent rebound.

Brent crude oil fell back below $US40 a barrel, while iron ore fell back yesterday to $US55.50 a tonne.

That saw BHP Billiton and Rio Tinto shed 3.4 per cent and Fortescue lose 1.6 per cent.

Woodside Petroleum lost 3.9 per cent on the renewed slide in oil prices, with smaller rivals Oil Search, Santos and Origin also losing between 3-5 per cent.

The sell-off also affected Australia's financial sector, widely seen (especially overseas) as being vulnerable to the domestic economic fallout from the commodity crash.

The big four banks were mostly down 1.8 per cent, with ANZ posting the smallest fall of 1.4 per cent, and Macquarie Group was also off 1.4 per cent to $67.86.

"Developed market equities have a heavy, soggy feel to them and on a number of metrics traders have been looking at overbought readings and decided to book a little profit," wrote IG's chief market strategist Chris Weston in a note.

Mr Weston said he thinks it is a bit early to say that share prices are "flashing a convincing sell signal" and he is not advocating an aggressive short position, betting on further falls.

"Our client base disagrees, with 73 per cent of all open positions being held short on the S&P 500 [index]," he added.

"There is similar positioning in the DAX and FTSE, and on the whole there is a view that the equity market has greater downside risks from here."

That sentiment was spread across the broader share market, with major retailers falling, such as JB Hi-Fi which lost 3.2 per cent and Woolworths down 1.3 per cent.

Markets around the region were also down, generally by a little less than 1 per cent in afternoon trade.

The Australian dollar was also hit, falling back below 75 US cents - it was worth 74.85 US cents by 4:43pm (AEDT).

Source: ABC News

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