The Australian stock market opened on a weak note on Friday with investors taking Wall Street cues and pressing some sales in early trading. The mood remains somewhat cautious ahead of the release of the quarterly monetary policy statement by the Australian Reserve Bank.
The benchmark S&P/ASX 200 Index, which drifted down to 3,910 earlier, recovered to 3,935 subsequently, but has faltered once again due to a strong round of selling in some material, financial and consumer staple stocks. The index is currently trading at 3,921, down 17.17 points from its previous close. The All Ordinaries index is down 14 points at 3,898.
Energy and healthcare stocks are trading firm. Materials stock have edged up a bit after a weak start. Consumer staples are exhibiting weakness. Industrials, financials, information technology and consumer discretionary stocks are trading mixed.
In the currency market, the Australian dollar is trading at 0.7539 to the U.S. dollar.
Among the other markets in the Asia-Pacific region, New Zealand is trading weak with its NZX 50 index posting a loss of 0.77%. The Korean benchmark index KOSPI is up modestly.
On Thursday, stock markets in the Asia-Pacific region had extended their recent upward moves, with Japan's benchmark Nikkei 225 Index jumping 4.6 percent. Japanese stocks were playing catch-up after the market was closed for the three previous sessions.
The major European markets ended on a mixed note on Thursday after seeing considerable strength earlier in the session. While the U.K.'s FTSE 100 posted a modest gain, the French CAC 40 Index and the German DAX Index fell 1 percent and 1.6 percent, respectively.
Save for a brief while at the start, Wall Street remained in the red and closed with sharp losses on Thursday as participants cashed in on the market's recent gains and took profits ahead of the release of the results of the government's stress tests of the nation's nineteen largest financial institutions.
Though traders were not expecting any major surprises from the results of the stress tests, as there were already some leaks to the media, uncertainty about the reaction to the release scheduled after trading hours caused the sell-off.
Additionally, some selling pressure was generated by the release of the results of the Treasury Department's auction of $14 billion worth of 30-year bonds, which attracted below average demand amid record government debt sales.
Additionally, mutual fund manager Axel Merk told RTT News that many of the financial firms determined to have sufficient capital would still not be out of the woods, emphasizing the serious headwinds that are going to have a negative impact on bank balance sheets in the future.
The initial strength in the markets came after the Labor Department released a report showing an unexpected decrease in initial jobless claims in the week ended May 2. The report showed that jobless claims fell to 601,000 from the previous week's revised figure of 635,000. Economists had been expecting jobless claims to edge up to 635,000 from the 631,000 originally reported for the previous week.
However, the report also showed a continued increase in continuing claims, which rose to a new record high of 6.351 million in the week ended April 25 from the preceding week's revised level of 6.95 million.
In corporate news, General Motors reported a first quarter loss of about $6 billion. GM also revealed that it burned through $10.2 billion during the quarter due largely to a 47 percent drop in sales.
The Dow closed down 102.43 points or 1.2 percent. The Nasdaq closed down 42.86 points or 2.4 percent and the S&P 500 ended lower by 12.14 points or 1.3 percent.
Crude oil prices managed to rebound heading into the close of pit trading. It settled $0.30 higher at $56.64 per barrel.
After trading hours, the U.S. bank regulators released the results of stress tests on 19 major U.S. banks. The results showed that about half of the country's biggest financial institutions need to improve their capital positions in order to ensure that they can weather a further downturn in the economy.
The results of the government's stress test showed that 10 of the 19 banks tested need to raise a total of $74.6 billion. The banks involved in the exercise account for two-thirds of the assets and more than half the loans in the U.S. banking system.
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