Originally published by CMC Markets
While yesterday’s closing mood has carried over to early trade in the Australian stock market, it has now stabilised. After opening weaker, with downward pressure being exerted by selling in the banks, they have now staged a limp recovery
Although bank stocks have now fallen to valuations that are at or below average levels for recent years, they are still well above “bargain basement levels”. This means there is not yet an obvious case for bargain hunters to step in, given the degree of political risk faced by shareholders in this industry and concerns about the potential for a down turn in the housing market.
The S&P/ASX 200 index has now fallen into a minor support zone formed by the March and May lows between about 5675 and 5700. Sellers may be reluctant to push the index below these supports today in the absence of international leads with major markets closed for holidays.
The potential for a downturn in residential construction is a key concern for Australian economy watchers. If today’s building approvals data does not rebound from March’s weak number, markets are likely to be concerned. However, while today’s building approvals data could be significant, traders will also be conscious of the risk of being wrong footed by the welter of data due to be released on Australian and international economies over the next few days.