Taking cues from Wall Street where stock prices tumbled on Monday on concerns over the impact of swine flu on the economy, the Australian stock market opened on a negative note Tuesday.
The benchmark index S&P/ASX 200 opened at 3,730, marginally down from its previous close and dropped down to 3,701 in early trading. Currently, the index is trading at 3711, down 21 points.
Financials are the worst hit. Energy, utilities, consumer discretionary and consumer staples are also trading sharply lower. Industrials and information technology stocks are also trading weak. However, healthcare and telecommunications stocks have bucked the trend and are trading with sharp gains.
Materials opened weak but have rebounded sharply and are trading firm now with Rio Tinto leading the charge with a near 3% gain. The S&P/ASX 200 Health Care index is up 1.6% over its previous close.
Commonwealth Bank of Australia, ANZ Bank and National Bank are trading weak with sharp losses. Insurance stock QBE Insurance is trading 1.5% down.
The Nikkei 225 benchmark of the Japanese market has opened weak and is currently trading 50 points down at 8,675. In Korea, the KOSPI is down marginally.
Concerns over the economic impact of the swine flu kept Wall Street in negative terrain for the major part of the session on Monday. Healthcare stocks were seen attracting buyers.
Qualcomm announced it has entered into a settlement and multiyear patent agreement with Broadcom, which will result in the dismissal with prejudice of all litigation between the companies.
While Hugh Johnson, chief investment officer for Johnson Illington Advisors told RTTNews that traders used the swine flu scare as an excuse to take some money off the table, he warned that a full blown epidemic could lead to a 10 to 15 percent correction.
Although the flu does seem to be spreading, many doctors agree that the swine flu is no more panic worthy than any other breakout of the human flu during flu season.
President Barack Obama said Monday that the spreading swine flu is something that should raise the country's state of alert but should not be seen as a cause for alarm.
On the corporate front, Verizon reported first-quarter net income of $0.58 per share, compared to $0.57 per share in the year-ago period. Excluding special items, net income attributable to Verizon was $0.63 per share, compared to $0.61 per share in same quarter last year. On average, analysts expected the company to report earnings of $0.59 per share.
Meanwhile, Whirlpool Corp. reported first quarter earnings of $0.91 per share, compared to $1.22 per share in the prior-year quarter. The company reported net sales of $3.57 billion, down from $4.61 billion in the year-ago period.
General Motors announced plans to restructure its operations in order to avoid the pitfalls of bankruptcy and the stock gained as much as 20%, its biggest single-session advance in more than a month. The company announced that it will cut 21,000 hourly jobs and reduce its U.S. dealer count by 42 percent by the end of 2010 under a revised viability plan. The company also plans to phase out its Pontiac brand and focus on its four core brands in the U.S.
Stock markets across the Asia-Pacific region closed mostly lower on Monday amid concerns about the impact of the swine flu outbreak. The Japanese market bucked the downtrend, however, with the Nikkei 255 Index edging up 0.2 percent.
Major European markets closed mixed. While the French CAC 40 Index closed down slightly, the U.K.'s FTSE 100 Index and the German DAX Index posted gains of 0.3 percent and 0.4 percent, respectively.
Trading on Tuesday could be impacted by the release of the S&P/Case-Shiller Composite Housing Index. Additionally, the Conference Board's consumer confidence index is also expected to be released.
On the earnings front, Pfizer, Office Depot, U.S. Steel and Bristol-Myers Squibb will report on Tuesday.
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