* 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 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
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)