Yesterday’s closing mood has carried over to early trade in the Australian stock market with sellers in control.

However while yesterday’s downward pressure being was exerted by selling in the banks, they have staged a feeble recovery this morning. The real estate, Telco and consumer discretionary sectors are leading the index down.

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 Australia 200 index is now approaching a minor support zone formed by the March and May lows between about 5670 and 5680. 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.