As poor data out of Asia and the bad news of the growing outlook of a recession in Europe are sending investors running for cover, the Australian stocks dropped to a two-week low.

Stocks have been closing lower for the fifth day out of six after more dismal news comes from Europe overnight which saw an increase of Italian bond to a euro-era record, which then has triggered a sharp selloff in commodities as investors were rushing to the perceived safe haven of the dollar.

Data revealed that China's manufacturing sector has continued to contract in December as exports slowed compounded fears that the euro zone debt crisis is already slowing growth in Asia.

According to CMC Markets sales trader Ben Taylor, a feeling of nowhere to hide at the moment is rampant among investors. And the once promised safety of gold has been hijacked in US dollar strength. US bonds in return give you little to no real return and equity markets are quickly losing their appeal.

At the close today, the benchmark S&P/ASX200 index has dropped by 50.7 points, or 1.2 per cent, at 4,139.8, while the broader All Ordinaries index lost 52 points, also 1.2 per cent, to 4,197.8.

On the ASX (Australian Securities Exchange) 24, the March 2012 share price index futures contract cut down 48 points or 1.2 per cent to 4,116, with 37,911 contracts traded while the December share price index futures contract, which expired at midday, dropped 26 points to 4,153.

Leading the market lower are the miners and energy stocks as the resource-heavy ASX became the worst performing index in the region.

The worst performers were the gold miners, shedding 3.8 per cent.

A 2.9 per cent to $30.88 loss was attributed to Newcrest Mining while BHP Billiton has showed a drop of 64 cents, or 1.8 per cent, at $35.06. The Rio Tinto shed $1.76 to hit $61.40.

According to IG Market's market analyst Stan Shamu, the huge drop in gold over the past few days has broken several support levels on the way down and if there is a break lower, there could be assumption that the gold super-cycle is over.

In Sydney, the price of gold was at $US1,567 by 1651 AEDT; down $US72.83 from Wednesday's local close of $US72.83.

Furthermore, banks have suffered a hit as ratings agency, Fitch, downgraded major French banks Credit Agricole and Rabobank on the back of escalating problems in Europe, along with France's Banque Federative du Credit Mutuel Denmark's Danske Bank and Finland's OP Pohjola Group.

Meanwhile, on the local state, National Australia Bank chairman Michael Chaney has united with Westpac this week in giving out a warning that Europe's debt crisis is pushing up the costs of funding for banks and the problem is far from over.

The warning came as NAB closed down 38 cents, or 1.6 per cent, at $23.48.

Westpac has also showed a drop of 34 cents at $20.46, while Commonwealth Bank was down 75 cents at $48.63 and ANZ was down 19 cents at $20.78.

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