Last week was a wild one on the Australian Stock Exchange with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) ending the week 3.7% lower, inclusive of a hefty 2.4% plunge on Friday.
The cause of the selling pressure can largely be attributed to negative investor sentiment towards Australia and New Zealand Banking Group's (ASX: ANZ) decision to undertake a $3 billion capital raising which led to a massive 7.5% slump in the bank's share price on Friday.
Investors are now betting that other banks will also be forced into dilutive capital raisings which led to all the majors facing selling pressure. For the week, Commonwealth Bank of Australia (ASX: CBA) fell 6.9%, while Westpac Banking Corp (ASX: WBC) lost 7.2% and National Australia Bank Ltd. (ASX: NAB) dropped 5.6%.
Selling pressure on bank stocks could continue this week as investors continue to run the numbers on the consequences of increased capital requirements on the profit margins of the banking sector.
Elsewhere, last week saw evidence of further weakness in the mining services sector with both Downer EDI Limited (ASX: DOW) and Orica Ltd (ASX: ORI) issuing downgrades. By the close of trade on Friday, Downer and Orica had fallen 12.5% and 18.5% respectively for the week.
The poor reception received by these two major mining services companies will no doubt cast a renewed cloud of scepticism over the rest of the sector as we head deeper into the August reporting season.
While few investors will be surprised that the resource and mining sector remains problematic, the volatility experienced across banking stocks will no doubt surprise many.
For investors who rely on their share portfolio for generating their income, the chase for dependable yield may heat up even further in coming weeks. This could lead to renewed buying of Telstra Corporation Ltd (ASX: TLS) which has become the "go to" stock for income-seeking investors.
