MSN: Australia shares tumble 3 pct on euro bank worries
By Victoria Thieberger
MELBOURNE, May 25 (Reuters) - Australian stocks tumbled 3.0 percent on Tuesday, more than wiping out the prior day's gains, as fresh signs of Europe's banking problems scared investors and deterred risk taking.
Europe's fumbling response to a debt crisis in Greece and bulging deficits in other euro zone countries has unnerved markets, and the Spanish central bank's takeover of a small lender at the weekend stoked fears of wider bank exposures.
The Australian market has fallen 14 percent from its recent peak in April as the European worries, the Australian dollar's fall and a planned mining tax whacked sentiment.
"It is definitely overdone, the forward P/E of the market is 10 times which is extraordinarily low," said E.L. & C. Baillieu director Richard Morrow. The long-term average forward price/earnings ratio for Australian stocks is around 14 times.
"People are staring down the barrel at this horrendous tax and everything has gone into abeyance ahead of that," he said.
Australian shares face uncertainty over mining investment plans following harsh comments by mining executives on the government's planned resource profits tax, which has put off foreign investors and hammered the currency.
, 3.440, -0.280, -7.530%) added its voice to the chorus on Tuesday, saying it is likely to delay plans to start paying dividends due to the proposed tax, warning investors its shares could fall further as a result. [ID:nSYU009982]
The shares duly extended early losses, to finish down 7.5 percent at A$3.44.
"Most industry leaders feel they could pay a bit more, but the way this thing has been structured, it has backed them into a corner and it is Draconian," Morrow said. The benchmark S&P/ASX 200 index (.AXJO
S&P/ASX 20025 May,2010
25/05/2010 17:44 Sydney, Australia.
Value Change % Change
4265.3 -130.0 -3.0%
Australian indices
International indices
, 4265.3, -130.0, -3.0%) slid 130.1 points to 4,265.3, finishing at the session's low, after gaining 2.1 percent on Monday. Volume was around 90 percent of an average day.
New Zealand's benchmark NZX 50 index <.NZ50> fell 1.9 percent to 3,003.8.
Banks and mining stocks led the way lower, with steep losses posted by Westpac (WBC.AX
, 22.260, -0.900, -3.890%), down 3.9 percent to A$22.26 and top miner BHP Billiton (BHP.AX , 36.280, -1.520, -4.020%) down 4.0 percent at A$36.28.
Against the trend, Ivanhoe Australia (IVA.AX
