Fears about slowing global economic growth dragged the local sharemarket lower on Wednesday, but the losses were trimmed by a partial recovery in the big banks.
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The benchmark S&P/ASX200 fell 42.9 points, or 0.8 per cent, to 5241.3. The broader All Ordinaries dropped 51 points, or 1 per cent, to 5241.6.
The International Monetary Fund on Tuesday cut its global economic growth forecasts to 3.3 per cent for this year and 3.8 per cent for next year, warning of weaker growth in core eurozone countries, Japan and big emerging markets such as Brazil.
The IMF also warned the risk of equity losses in 2014 had risen and stock valuations might be "frothy". Adding to investor worries, German industrial output in August fell at its steepest rate since the height of the global financial crisis, in another sign the eurozone's largest economy might be in recession.
After a fall on Wall Street in reaction to the IMF report and German growth worries, the local sharemarket started the day down as far as 1.4 per cent. The big banks lifted the market off the day's low, as they found some buyers, but were unable to finish in the black.
Commonwealth Bank fell 1 per cent to $75.02, while NAB fell 0.7 per cent to $32.15. ANZ fell 0.7 per cent to $31.30, while Westpac fell 0.4 per cent lower to $32.28.
"The markets are caught up in a global growth scare now, emanating out of Europe and the data from there over the past few days following on from the disappointment with the European Central Bank," Morgan Stanley strategist Malcolm Wood said.
"We think if you step back from that for just a moment ... the US data is actually quite healthy and that a strong US dollar will help Europe and Japan in trying to balance some global growth."
The US will begin its reporting season overnight on Thursday, with Alcoa.
Mr Wood said there were expectations that company accounts would generally be positive and follow the recent spate of economic data.
"Expectations are for a rise of 4 per cent year-on-year. In the past few quarters, the outcomes have been significantly stronger than the number going into the quarter, and we would expect something like that to happen again," Mr Wood said.
The Australian market has fallen 7.4 per cent since its 2014 high in early September as yield stocks, mainly financials, have suffered.
Despite the fall on Thursday, UBS strategist David Cassidy said the market looked oversold and he could now see better value.
"There is no sign of any broad-based deterioration in the earnings backdrop that would help explain the market's underperformance," Mr Cassidy said.
"The August result season was solid and a 6 per cent [year-to-date] Australian dollar pullback helps the outlook for earnings."
In company news, BC Iron has now picked up more than 90 per cent of Kerry Stokes' Iron Ore Holdings, giving it the right to compulsorily acquire any remaining shares.
BC Iron shares rose 0.3 per cent to $1.485, while Iron Ore Holdings shares fell 2 per cent to 75¢.
Rio Tinto has contacted Macquarie Group about defending renewed interest of a bid from Glencore after the Swiss miner said it would not approach Rio for at least half a year.
Rio shares fell 1.6 per cent to $59.09, after rallying strongly on the previous day due to the takeover talk.
Among other miners, BHP Billiton fell 1.2 per cent to $32.84, while Fortescue Metals Group fell 1.2 per cent to $3.40.
Oil explorer FAR saw its shares rise 45 per cent to 14.5¢ following the discovery of an offshore oil reservoir near Senegal.
Media stocks took a battering on Wednesday after advertising figures showed slow growth in the six months to June.
Fairfax Media shares fell 3.1 per cent to 77.5¢, while News Corporation shares fell 2.5 per cent to $17.53.
Among the television networks, Ten Network finished the day 2.3 per cent lower at 21.5¢, Nine Entertainment fell 2.4 per cent to $2.03 and Seven West Media fell 1.5 per cent to $1.60.
