The Australian stock market opened on a weak note Wednesday with investors choosing a cautious path amid swine flu worries and reports that U.S. regulators are pushing Citigroup and Bank of America to raise more capital following the government's stress test analysis.
The benchmark S&P/ASX 200 very nearly rebounded into positive zone after an early fall, but has faltered on the back of heavy selling in bank and materials stocks. The benchmark index is currently trading 18 points down at 3,690.
Healthcare stocks are in demand once again. Energy, consumer discretionary and utilities stocks are also trading firm. Telecommunications stocks are up marginally.
Among materials stocks, Rio Tinto is down 3%. Newcrest Mining is trading lower by 2.6% and Amcor is down with a loss of 3.8%.
In the banking sector, ANZ Bank is down by over 4%. Commonwealth Bank of Australia is down nearly a percent and National Australia Bank is trading 1.7% down.
Among utilities stocks, AGL Energy is up 1.2%. Healthcare stock CSL is trading higher by around 1%. Among capital goods, Leighton Holdings is up 1.3%. Media stock Newscorp. is up 1%.
In currency market, the Australian dollar is trading at 0.7095 to the U.S. dollar.
Wall Street had remained choppy right through the session on Tuesday and ended flat as investors looked for direction amid mixed economic and corporate news. Concerns that the swine flu outbreak may become a pandemic weighed on the markets to a significant extent. An increase in the number of confirmed cases of swine flu has led the World Health Organization to raise the level of its influenza pandemic alert to phase 4. At the same time, the WHO does not recommend that countries close borders or restrict travel.
June crude oil opened lower Tuesday morning due to worries that a spreading swine-flu outbreak will curtail travel, and in turn reduce oil demand. However, the futures contracts were able to recoup most of their losses during the session, and closed at $49.92 per barrel, down $0.22 for the session.
In economic news, the report from the Conference Board showed that the consumer confidence index jumped to 39.2 in April from an upwardly revised 26.9 in March. Economists had expected the index to increase to 29.7 from the 26.0 originally reported for the previous month.
Ken Goldstein, an economist at the Conference Board, told RTTNews that the better than expected reading demonstrated that now instead of being very depressed, we're simply just depressed.
Goldstein said, We've started the long climb up from record low levels, but he warned that it's going to be a long, tough and very difficult climb.
Separately, a report from Standard and Poor's showed that the S&P/Case-Shiller 20-City Composite Home Price Index fell at an annual rate of 18.6 percent in February, a modest deceleration from the 19.0 percent drop in prices that was reported for January.
In other news, the Wall Street Journal reported that regulators are pushing Bank of America (BAC) and Citigroup (C) to raise more capital following early results of the government's stress test analysis, generating some concerns about the results of the tests. The Journal said that the capital shortfall amounts to billions of dollars at Bank of America. The report specified that executives at both banks are objecting to the preliminary findings from the government's examination.
Stock markets across the Asia-Pacific region closed considerably lower on Tuesday amid continued concerns about the economic impact of the swine flu outbreak. Japan's benchmark Nikkei 225 Index showed a notable decline, closing down 2.7 percent.
The major European averages also showed notable weakness, although they closed off their intraday lows. The U.K.'s FTSE 100 Index and the French CAC 40 Index both fell 1.7 percent, while the German DAX Index closed down 1.9 percent.
In the U.S., gross domestic product data for the first quarter will be released on Wednesday, headlining a busy day on the economic front. Economists expect the GDP report to show a 4.7 percent decrease in the first quarter following a 6.3 percent decrease in the fourth quarter.
The Federal Reserve also concludes its two-day meeting on Wednesday, with the Federal Open Market Committee due to announce the results of the meeting at about 2:15 pm ET. The Fed is widely expected to leave interest rates unchanged.
Additionally, Burger King is expected to report its quarterly earnings before the bell along with Wyeth, Aetna, General Dynamics and Time Warner.
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