Australia shares end 0.5 pct lower; up 15 pct in 2012
* S&P/ASX down 0.5 pct, U.S. fiscal cliff weighs * Benchmark up 15 pct in 2012, the best since 2009 * BHP, Rio down 0.8 pct * Fairfax, Sundance rally (Updates to closing levels, adds comments) SYDNEY, Dec 31 (Reuters) - Australian shares fell 0.5 percent on Monday, trading in low volumes in a shortened session ahead of the New Year's Day holiday, dragged by big miners and banks as investors awaited the outcome of U.S. budget talks. The market has risen 14.6 percent in 2012, the best yearly gain since the recovery of 2009, although it some lost ground on the last day of the year with all eyes on the U.S. fiscal tussle. A total of $600 billion in tax hikes and automatic cuts to government spending will start kicking in on Tuesday - New Year's Day - if U.S. politicians cannot reach a deal. Economists fear the measures will push the U.S. economy into a recession. "I imagine some deal will be done, but the problem will be the impact on confidence," said Damien Boey, an equity strategist at Credit Suisse. Analysts expected a difficult year ahead, with Europe continuing to cast a shadow over the financial markets, but the Australian market might be supported by more interest rate cuts. "Cash rates will continue to come down next year," said Winston Sammut, investment director at Maxim Asset Management. "You will see money moving out of cash back into the market, basically to hold where it was." The benchmark S&P/ASX 200 index fell 22.4 points to 4,648.9, according to latest data. It rose 0.5 percent to 4,671.3 on Friday, its highest close since June 2, 2011. The market saw a brief rebound during the session though, after the December HSBC Purchasing Managers' Survey showed the pace of manufacturing activity in China, Australia's biggest resources buyer, hit its fastest rate since May 2011. However, China's stimulus-driven growth might be unsustainable if a weaker U.S. economy results from a fiscal cliff mishap, Boey added. "If you've got a weaker American economy because taxes have gone up and confidence is down, what you will find is that the key driver of commodities prices, which is the Chinese economy, will not actually be able to sustain strong growth," he said. Among the top miners, both BHP Billiton Ltd and Rio Tinto Ltd lost 0.8 percent. Gold miner Newcrest Mining Ltd ended 1.5 percent lower. The banking sector was weaker as well, led by a 0.9 pecent drop in Westpac Banking Corp. Australia and New Zealand Banking Group bucked the trend and gained 0.2 percent. Shares in Fairfax Media Ltd rallied 7.4 percent after a consortium of allies of shareholder Gina Rinehart purchased a small holding to add to the mining mogul's stake. Sundance Resources Ltd soared 15.6 percent after the Republic of Congo granted it a key mining permit and following reports China's Hanlong Group plans to complete its long-delayed $1.4 billion takeover by March. New Zealand's benchmark NZX 50 index fell 0.4 percent to 4,066.5. It has risen 24.2 percent for the year. Both the Australian and New Zealand markets had shortened sessions on New Year's Eve. (Reporting by Maggie Lu Yueyang; Editing by Eric Meijer)
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