Australian stocks: Miners drag Aussie stocks lower

SYDNEY - Australian shares shed 1.2 per cent on Thursday as a sell-off in metal markets weighed on miners such as BHP Billiton, but retailer David Jones got a boost from better-than-expected third-quarter sales.

The benchmark S&P/ASX 200 Index .AXJO fell 60.9 points to 4,976.8, based on the latest Reuters data, its lowest close since March 17, 2006. The index is now down 8 per cent from its record peak of 5,406.7 touched on May 10.

"Investors have to get prepared for short-term volatility," said Craig James, chief equities economist at Commonwealth Securities.

"But we still get back to fundamentals: commodity demand is strong, supply is not keeping up and that is going to keep prices supported in the long term."

Copper MCU3 lost further ground on Thursday as investors continued to flee a volatile and nervous market.

"What we have seen is a correction, but we have only seen commodity prices come back a fraction of what they had moved up," Neil Boyd-Clark, a portfolio manager with ABN AMRO Asset Management, said.

"We are reasonably nonplussed by the retracement in most of the mining shares," he said adding that his fund would look at companies that are exposed to commodities like iron ore and diamonds.

"They should be better than the leveraged plays, which are exposed to precious and base metals, where you don't have any certainty on the earnings side," Boyd-Clark said.

Stocks to watch

* BHP Billiton Ltd. BLT.L, the world's top miner, fell 3 per cent to A$27.45, Zinifex Ltd., the world's second-biggest zinc miner, fell 2.7 per cent to A$10.26 and Lihir Gold Ltd. dived 5.5 per cent to A$2.76.

* Upmarket retailer David Jones Ltd. climbed 4.1 per cent to A$2.80 after reporting a 3.3 per cent rise in its third-quarter sales.

* James Hardie Industries N.V., the top maker of home siding in the United States, added 1.9 per cent to A$8.70 after new US home sales in April rose a higher-than-expected 4.9 per cent.

* internet communications company Destra Corp. Ltd. rose 6.1 per cent to A$0.35 after acquiring video content provider Visual Entertainment Group for A$4 million.

* Medium-sized New Zealand insurer and fund manager Tower Ltd. 8.5 per cent to A$2.55 after reporting a 55 per cent rise in its first-half profit.

* Rio Tinto RIO.L eased 0.5 per cent to A$76.85. It said on Wednesday it was pulling out of the Sari Gunay gold mining project in western Iran after deciding it was not commercially viable.

- REUTERS