Markets have had some good news over the past few days ranging from the French Election to a rebound in US jobs growth and solid profit reports from Westpac and CBA. However, the markets have been struggling to make significant headway. Full valuations have pre-empted a benign macro scenario of ongoing moderate growth and markets appear to need good news to hold them around current valuations.

Into this mix has been thrown this morning’s press reports that tonight’s budget will include a bank tax. Shareholders are likely to be unconcerned about how whether the tax is classified as a guarantee fee or an impost on lending to big companies only. However, it is described it will represent an additional tax or fee and the market is likely to be nervous about this prospect until they get details of what might be involved and what capacity of banks might have to pass this cost on to customers.

News of the bank tax has put pressure on bank stocks this morning despite a quarterly report from CBA which shows that moderate growth in lending volumes and reduced bad debt costs have combined to outweigh the negative impact of pressure on interest margins.

Yesterday’s news that China’s iron ore imports fell in April will not help sentiment in the major mining stocks with investors yet to see any signs of the spot iron ore price establishing a base.

Energy stocks are having a better day supported by news that OPEC may agree to extend its production cuts into 2018, Given recent increases in US production, markets are likely to take comfort from an agreement that lasts long enough to allow the market to move towards balance and reduce inventory

This morning’s weakness in the ASX 200 is being driven by selling in bank stock. The positive international macro environment has led to quite a few of the other index sectors rallying today including info tech and industrials as well as energy.