SYDNEY: Australian stocks lost almost three percent on Monday after Greece said it would miss a deficit target set by European leaders as part of its bailout deal, deepening fears of a default.
The benchmark S&P/ASX 200 closed 111.6 points or 2.78 percent lower at 3,897.0 points after Athens said its deficit should drop to 8.5 percent of GDP in 2011 -- short of the target set by the IMF and EU.
"We're getting smashed by global fears," said Chris Weston, market analyst at IG Markets. "It's all about what's happening in Europe."
"I think the market is starting to price in global recession now," he added.
The commodities-linked Australian dollar hit its lowest level since last December, slumping to an intraday low of 95.95 US cents before regaining some ground to 96.24 US cents in late trade.
It was fetching 97.66 US cents at Friday's close, just two months after hitting a record 110.81 US cents.
Losses were broad-based, with stocks linked to global growth such as mining and energy experiencing heavy falls, while banks took a hit due to fears of contagion by institutions exposed to Greek debt, Weston said.
BHP Billiton lost 2.48 percent, Rio Tinto was 4.05 percent weaker and Woodside Petroleum shed 2.65 percent.
Among the major banks Westpac gave up 4.13 percent, National Australia Bank dropped 3.31 percent, Commonwealth slipped 3.67 percent and ANZ was off 2.97 percent.
Analysts warned that the Aussie dollar could now see sharp falls, with support levels slipping further and further apart.
"Once the downward momentum takes over it can go in big leaps. We're moving into some uncharted territory, at least in terms of recent history," said TD Securities strategist Roland Randall.
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