Australian share market to open lower after Wall Street slump

THE share market is expected to start the week negative after US and European markets plunged on Friday.

Bad day ... the share market is expected to open in negative territory tomorrow / Reuters

Shares to open in negative territory

THE share market is expected to start the week lower after US and European markets plunged on Friday.

Commonwealth Securities senior analyst Craig James expects the local share market to fall by up to 30 points this morning.

"Overall the market will probably be down about 20 to 30 points," Mr James said.

The local market would fall on the back of weaker US and European markets and lower base metal prices, he said.

"The European markets were sharply down and the US market did manage to recover some ground towards the end but the Dow Jones Industrial Average was still down 100 points.

"We also had the fact that oil eased a touch and base metal prices were off," he said. "The only real area likely to do well on Monday is gold."

"The gold price remains around record highs, so that should be good news for our gold sector."

US stocks plunged deeper into six-year lows on Friday on rumours of bank nationalisation, which President Barack Obama's administration moved to quash.

The Dow Jones Industrial Average fell 100.28 points, or 1.34 per cent, to 7365.67 after a sharp sell-off on Thursday.

Mr James said the Australian economy still continues to hold up a lot better than other economies around the world.

"I think that's gradually being taken on board by investors that we aren't anywhere near the same position as other markets."

Mr James said the focus this week would be on company profit reports.

"We're still in the middle of the earnings season so that continues to dominate attention.

"The likes of Bluescope Steel, Transfield Services and Fairfax Media will be reporting earnings on Monday, so that will get a lot of attention."

On Friday, the Australian share market closed firmly in the red following a negative lead from Wall Street.

The benchmark S&P/ASX200 index was down 46.5 points, or 1.35 per cent, at 3402.4 while the broader All Ordinaries index fell 45 points, or 1.32 per cent, to 3353.

Mr James said he expected to see further falls on the local market in the month ahead.

"We believe our share market may have potential to fall quite significantly over the next month or so getting down to as low as 3000 points before starting to recover and then pick up over the second half of the year.

"The environment still remains gloomy and investors are more likely to stay on the sidelines or embrace other asset classes rather than go on the share market."

In economic data this week, the Australian Bureau of Statistics (ABS) publishes the private new capital expenditure and expected expenditure for the December quarter.

"Over the week it's the private capital expenditure figures on Thursday that will be of most interest," Mr James said.

Other data out this week includes the ABS labour price index for the December quarter and ABS construction work done for the December quarter, due out on Wednesday.

On Friday, the Reserve Bank of Australia (RBA) releases financial aggregates data for January.