MELBOURNE/WELLINGTON, May 4 (Reuters) - Australian shares sank 1.3 percent on Wednesday with resources shares among the hardest hit on fears of further declines in metal and oil prices.
Big banks also fell as investors took profits on strong gains in the previous session after the country’s central bank cut interest rates to a record low.
The S&P/ASX 200 index dropped 68.34 points to 5,285.50 by 0304 GMT, wiping out half of the market’s gains from Tuesday.
Investors were rattled by a bounce in the U.S. dollar overnight on prospects of a rate hike. That pounded mining and energy stocks which had rallied over the past three months on U.S. dollar weakness that had driven gains in commodities prices.
“There’s concern that what we saw last night could be ongoing and that a lot of the commodity prices that bounced so strongly, including iron ore and oil, will moderate towards the middle of recent ranges,” said Michael McCarthy, chief strategist at CMC Markets.
Top miner BHP Billiton tumbled nearly 10 percent at one point in its worst fall since November 2008 after prosecutors in Brazil sued it and its partner Vale for $44 billion for a tailings dam collapse that killed 19 people and polluted a major river.
Rivals Rio Tinto and South32 fell more than 6 percent, while Fortescue Metals Group fell more than 4 percent.
Gold miners also fell as gold prices dipped with the U.S. dollar’s rise. Newcrest Mining and Evolution Mining slid more than 4 percent.
“The market’s very fragile at the moment,” said Martin Angel, a dealer at Patersons Securities. “The miners have all had a good rise recently. People are deciding to take some money off the table.”
The major banks all fell 0.7 to 1 percent. National Australia Bank is due to report half-year results on Thursday, following weaker-than-expected profits from Australia and New Zealand Banking Group and Westpac Banking Corp earlier this week.
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New Zealand’s benchmark S&P/NZX 50 index slipped 0.1 percent, or 7.91 points to 6,835.86, dominated by losses in Air New Zealand and Xero.
Air New Zealand dropped 4.2 percent, as investors took profits after a jump on Tuesday on a positive outlook for fuel prices and tourism given at the company’s investor day presentation.
Retirement village operator Metlifecare led gains, rising 2.3 percent.
Shares in Fonterra’s fund, which provides investor exposure to the farmer-owned dairy exporter, edged down 0.34 percent after a fortnightly auction showed global dairy prices fell 1.4 percent.
Reporting by Sonali Paul and Charlotte Greenfield; Editing by Kim Coghill