A last minute rally wasn't enough to lift Australian stocks back into the green at the close of trade on Thursday. The downward spiral was led by the retailers and compounded by losses from market heavyweights in the banking and resources sectors. The benchmark S&P/ASX200 index was down 24.1 points, or 0.53 per cent, at 4,490.7, while the broader All Ordinaries index dropped 21.9 points, or 0.48 per cent, to 4,561.3. On the ASX 24, the September share price index futures contract was 18 points lower at 4,470, with 34,425 contracts traded. Coal, steel and gold stocks all rallied as investors scrambled to climb aboard the commodities gravy train after US Federal Reserve
chairman Ben Bernanke alluded to the possibility of a third round of quantitative easing.

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Gold miner Newcrest added 84 cents, or 2.16 per cent, to $39.80, Iluka Resources gained 59 cents, or 3.5 per cent, to $17.44, while oil and gas explorer Santos added eleven cents, or 0.84 per cent, to $13.25. Mining heavyweight BHP Billiton was down three cents at $43.60 and Rio Tinto closed flat at $80.95. Commonwealth Bank lost 58 cents to $49.02, NAB dropped 30 cents to $23.46, Westpac shed 37 cents to $20.77 while ANZ gave up 18 cents to $20.98. Retail stocks took a hammering on the back of Wednesday's aftermarket downgrade of retail heavyweight David Jones. David Jones shares were sold off aggressively, losing 71 cents, or 18.61 per cent, to $3.20. Rival Myer went the same way, shedding 17 cents, or 6.42 per cent, to $2.48, while Westfield Group lost 20 cents, or 2.32 per cent, to close at $8.42.

Qantas continued to plummet, losing 3.5 cents to $1.825 after engineers threatened to take industrial action on Friday. News Corp closed at $15.20, adding 46 cents after withdrawing its bid for British pay TV broadcaster, BSkyB on the back of the controversial phone hacking scandal. The media giant's non-voting stock was up 50 cents, or 3.51 per cent, at $14.76. The spot price of gold in Sydney was $1,585.30 per ounce, up $16.25 from Wednesday's close of $1,569.05 per ounce. National turnover at was 2.398 million shares, worth $5.09 billion, with 482 shares up, 549 down and 388 unchanged.

The Australian dollar rallied sharply Thursday as Moody's decision to put its U.S. debt rating on review for possible downgrade hampered that country's currency at the benefit of most others. The move in the Australian dollar was particularly noteworthy in that it was accompanied by gains for Australian bond prices. Typically, given the risk sensitive nature of Australia's currency, the country's bonds and currency move in opposite directions. Still, some of the big rally in the Australian dollar late in New York action that continued early in Asia stalled as the session wore on, with significant risks upcoming in Europe and technical factors at play. That profit-taking saw the Australian dollar reverse from an intraday high of $1.0797. The Australian dollar was at $1.0737, up from $1.0634 late Wednesday. Against the Japanese yen, the Australian dollar was at 84.80, up from 84.50.

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