June 20, 2013 / 6:48 AM / 4 years ago

Australia shares dive on Fed stimulus plan, weak China flash PMI

(Adds detail, comment)

SYDNEY, June 20 (Reuters) - Australian shares dived 2.1 percent on Thursday, its largest one-day drop in four months, as global equities tumbled after Federal Reserve Chairman Ben Bernanke confirmed fears the U.S. central bank could begin to scale back its stimulus measures later this year.

Banks led the sell-off, with top lender Commonwealth Bank of Australia down 3.1 percent while Westpac Banking Corp plunged 3.7 percent and National Australia Bank dropped 2.8 percent.

Australian shares were double-punched by the HSBC China “flash” Purchasing Managers’ Index, which stood at 48.3 in June from May’s final reading of 49.2. It drifted further away from the 50-point level demarcating expansion from contraction.

”What we saw out of the U.S. last night - that might be the biggest reason why the market’s not doing well, said Steven Daghlian, market analyst at Commonwealth Securities. “But the fact that the PMI data was also worse than expected, that would have added fuel to the fire.”

The preliminary or “flash” reading has hit its weakest level since September as new orders faltered, reinforcing signs of tepid economic growth in the second quarter.

Sydney’s S&P/ASX 200 index dived 103 points to finish at 4,758.4. The benchmark rose 1 percent to close at a two-week high on Wednesday.

Miners also traded lower: BHP Billiton Ltd slid 2.6 percent while rival Rio Tinto Ltd dropped 3.3 percent.

The Australian stock market has been hit hard recently on concerns over the Fed’s stimulus, slowing growth in China and turbulence in Japanese equities.

“We think the equity market reaction is unjust and an over-reaction,” said Chris Weston, IG’s chief market strategist.

“The rotation from stimulus-led growth to organic growth is never going to be smooth, but when the market works out that the Fed’s plan is actually a good thing, then hopefully clearer heads will prevail.”

The local bourse fared slightly better than the rest of the region. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 3.5 percent, its biggest one-day percentage drop since November 2011.

Fortescue Metals Group Ltd plunged 6.6 percent to A$3.14, its lowest trading price since September 2012. The company said the proposed sale of a stake in its rail and port assets in Australia’s iron ore belt that could net up to A$4 billion ($3.8 billion) was on track, but would be delayed by some months.

Intrepid Mines tumbled 6.5 percent to A$0.215. Shareholders of Intrepid Mines on Thursday backed their board to try to win back rights to a $5 billion copper and gold project in Indonesia that the company lost last year, defeating a plan to oust the board, spokesmen for both sides said.

U.S. stocks fell more than 1 percent on Wednesday after Bernanke said the central bank would start to reduce its stimulus measures later this year if the economy is strong enough.

New Zealand’s benchmark NZX 50 index lost 1.1 percent or 47 points to finish the session at 4,398.5. (Reporting by Thuy Ong; Editing by Eric Meijer)

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