The ASX 200 lost 181 points (-3.9%), settling at 4474.
Sagging consumer confidence and a sharp profit downgrade from David Jones (ASX:DJS) triggered major losses among the retailers.
DJS was the hardest hit, plunging 23% for the week. Rival Myer Holdings (ASX:MYR) slumped 9%.
In the media space Newscorp (ASX:NWS) sank almost 12%, as its deepening phone hacking scandal overshadowed a US$5 billion share buyback announcement.
Takeover activity buoyed some of the domestic coal stocks. Macarthur Coal (ASX:MCC) surged 35.5% following an offer from Peabody and ArcelorMittal.
BHP Billiton (ASX:BHP) also made M&A news after lobbing a US$15 billion bid for US-based shale gas company, Petrohawk.
Rio Tinto (ASX:RIO) dropped 3.5% despite reporting a rebound in quarterly iron ore production.
Economic News. What Does it Mean?
Business and consumer confidence data released last week was the major Australian economic news, with both sides reporting a drop in confidence.
On Tuesday, NAB data showed business confidence had dropped to a neutral reading of zero, down from six.
The retail and construction sectors were particularly negative, amid trying times for retailers and a stagnating housing sector.
Consumer confidence also fell sharply in July, with Australians turning sour in the face of European debt concerns and the carbon tax.
The Westpac consumer confidence index slumped 8.3% in July to 92.8 – the lowest level since the height of the GFC.
However, the poor result also suggests the RBA may hold fire on raising interest rates in August, providing some relief to consumers already faced with higher living costs.
Overseas Market and Commodity Wrap:
Global equity and commodity markets took another tumble last week, as European debt fears spread and the United States saw its credit rating under threat.
In Europe, Ireland saw its credit downgraded to junk status, following Greece and Portugal, with Italy and Spain next in line to see rating cuts.
This put European shares under severe pressure, as investors pondered the implications of a potential sovereign default. The UK market dropped 2.4% for the week, the German market fell 2.5% and the French market slumped almost 5%.
In the US, the European debt worries were compounded by the two big ratings agencies – Standard & Poors and Moody’s – both threatened to downgrade the United States’ AAA credit rating unless Congress raised its debt ceiling and made some headway on the budget deficit.
The focus on global debt overshadowed what was otherwise a positive week of earnings reports from American companies, which included knockout results from tech giant Google and banking behemoth JP Morgan.
The Dow Jones shed 1.4%, the S&P 500 lost 2.1% and the Nasdaq dropped 2.4%.
Most Asian markets also struggled. The Hang Seng slumped 3.7% and the Nikkei finished the week with a 1.6% loss. The Chinese market was virtually the only major index to finish in positive territory, gaining 0.8% for the week.
Commodity prices were mixed. Gold continued its march higher, climbing to fresh record highs as investors abandoned shares for safer assets.
Oil prices rose 1.1%, but base metals mostly closed lower. Aluminium was the weakest, down 2.8% for the week.