The Aussie market endured a heavy sell-off last week, with Europe's escalating debt crisis crushing investor sentiment.

The ASX 200 tumbled 246 points (-5.9%) for the week, closing at 3903.

Mining stocks bore the brunt of the sell-off amid fears over commodity demand. BHP Billiton (ASX:BHP) slumped 9.6% and Rio Tinto (ASX:RIO) sank 12.1%.

Concerns about falling rare earths prices weighed heavily on Lynas Corporation (ASX:LYC), which crashed 33.2% for the week.

The big banks also came under pressure last week; Commonwealth Bank (ASX:CBA) closed down 4.9% and National Australia Bank (ASX:NAB) dropped 8.1%.

Among the retailers, David Jones (ASX:DJS) fell 1.9% after a fall in its FY11 profit. The group stuck to its 1H12 guidance, which provided some support for its share price.

Foster's Group (ASX:FGL) was among the week's few outperformers (+6%) after agreeing to a revised offer from SABMiller.

Economics

Last Tuesday's monetary policy meeting minutes showed the RBA becoming more concerned over the global financial outlook due to Europe's debt problems and a slowing US economy.

However the RBA gave no indication it was considering a rate cut, instead alluding to the strong conditions in the mining sector underpinning medium-term inflation.

The board said there was little data to help it assess the impact of recent global developments on inflation.

The statement didn't appear as dovish as the market was expecting, lowering the odds of a series of rate cuts in coming months.

The RBA's semi-annual financial stability report was also released last week.

The report showed that over the past year, domestic households were cutting back on spending to pay down debt and increase savings.

In a similar observation, credit growth had slowed to an annualised 4.5% in the six months to July.

Softness in the housing market also meant that mortgage arrears were drifting higher, as consumers contended with higher costs of living.

Overseas

Fears of a Greek default and an ensuing financial crisis triggered widespread carnage on global markets last week.

American markets were battered despite the Fed's plans to stimulate the US economy by lowering long-term interest rates. The Dow, S&P500 and Nasdaq slumped between 5% and 7% each.

Banking stocks were among the worst performers Europe amid fears over their exposure to sovereign debt. The FTSE, DAX and CAC suffered similar falls to the key US indices.

The week's biggest losers were commodities, which plunged as traders sold down their positions to cover losses in equities and other assets.

Gold (-9.6%), copper (-15.2%) and silver (-26.3%) bore the brunt of the selling ahead of the CME raising margining requirements on their respective futures contracts.

Other base metals also recorded double digit percentage falls on fears a slowing global economy will hurt demand for commodities.

The losses were more muted in Asia, where the Nikkei ended down 3.4% and the Shanghai Composite was off by 2%.

Weekly Investors Markets Wrap: September 26 is a post from: Australian Stock Report Market Pulse Blog