Greek jitters send ASX into the red

A surge in global market volatility on Greek default jitters and a rampant US dollar knocked the Australian sharemarket into the red and the dollar to a five-week low.

Chinese stimulus hopes, rising iron ore prices and falling bond yields were not enough to offset the market uncertainty and the S&P/ASX 200 index fell 48.1 points, or 0.83 per cent, to 5725.3, with a bigger than forecast 2.4 per cent slump in March-quarter construction stoking domestic growth concerns.

“Seemingly there were many 'light bulb' moments overnight, when competing ideas, that have been around a while, suddenly gained traction and markets ran with them,” National Australia Bank currency strategist Emma Lawson said.

“It has produced some inconsistent moves but in isolation they have been explained away. The most consistent and largest move is the stronger US dollar and that has been an overriding force.”

The Aussie dollar dropped US0.4¢ to US77.40¢ as the greenback jumped against major currencies on safe-haven buying and expectations of a rate hike this year.

Greece might be able to buy time if the IMF agreed to a lump sum payment of all its commitments later next month, but eurozone equities and bonds all fell on mounting fears it would still be forced into default.

Government 10-year yields dropped 6.8 points to 2.848 per cent as the construction data showed an acceleration over the mining investment cliff.

“The key downside surprise was a sharper than expected slump in private engineering activity (minus 9.8 per cent),” Westpac economist Andrew Hanlan said.

“This is a reminder of the significant headwind from the downturn in mining investment as work on key iron ore, coal and gas projects near completion.”

The Shanghai composite index took a breather, rising just 0.3 per cent at the close of the ASX.

In Tokyo the Nikkei index was slightly firmer.

Spot iron ore jumped 2.8 per cent to $US62.78 a tonne and Dalian iron ore futures were 0.2 per cent down today.

CMC Markets chief market strategist Michael McCarthy said it had been a disappointing day for investors as the market fell through a "technical” support level of 5750 points, amid weakness in overseas markets.

"It appears that a technical failure at 5750 points on the index has added to the weight on the market today,” Mr McCarthy said.

"Given the negative leads that we had from overseas markets, it wasn’t surprising to see the weakness, but that push through the technical level has added weight to the selling."

Mr McCarthy said technical failure indicated underlying weakness in the market, with pressure on energy and materials stocks due to falls in commodity prices spreading to other unrelated sectors.

Mr McCarthy said investors needed to see the market stay above the 5750 point level before they felt confident enough for a push towards 6000 points.

In the resources sector, global miner BHP Billiton was off 48 cents at $29.34, and Rio Tinto was 98 cents lower at $57.31.

Iron ore pure play Fortescue Metals dropped four cents to $2.36. Fortescue Metals has confirmed reports that it set up a company in Singapore but insists it has not used it to avoid paying tax.

Among the major banks, the Commonwealth shed 51 cents to $84.13, ANZ reversed 17 cents to $32.52, National Australia Bank gave away 44 cents at $33.56, and Westpac dumped 45 cents at $33.20.

Among other stocks, McGuigan wines owner Australian Vintage fell two cents to 38 cents as it warned of a 10 per cent drop in full year profit.

Programmed Maintenance Services climbed nine cents to $2.64 as chief executive Chris Sutherland said a proposed takeover of rival Skilled Group would give it the scale to compete for bigger contracts.

Construction materials group Adelaide Brighton surged 22 cents to $4.80 as it predicted steady sales this year but said competition is likely to pick up.

The broader All Ordinaries index was down 46.2 points, or 0.8 per cent, at 5724.2 points.

The June share price index futures contract was down 38 points at 5740 points, with 24,759 contracts traded.

National turnover was 1.64 billion securities worth $4.55 billion.