The Australian stock market is expected to open weaker on Monday, tracking the US bourse where investors have adopted a cautious stance following a recent run up in share prices.
The US market faltered on Friday amid a lack of major economic or corporate news, with the key Dow Jones Industrial Average falling 15.87 points, or 0.19 per cent, to 8,539.73.
The Nasdaq gained 19.75 points, or 1.09 per cent, to 1,827.47 while the broader Standard & Poor's 500 index advanced 2.86 points, or 0.13 per cent, to 921.23.
Over the week to Friday, the Dow Jones Industrial Average had slumped 2.95 per cent to 8,539.73, ending a four-week winning streak.
In Australia, the September share price index futures contract pointed to a fall in the local market on Monday, after finishing the overnight session on Friday at 3,863, down seven points.
Local market watchers are expecting some volatility as the week progresses, ahead of a two-day meeting of the US Federal Reserve's monetary policy body and amid fears recent rises in stock prices may have been overdone in the US and Australia.
The gathering of the Federal Open Markets Committee (FOMC) on June 23 and 24, which concludes early on Thursday Australian time, will be keenly watched to see if the outcome supports sentiment in financial markets that the downturn in the US economy may have bottomed out and a recovery is on the way.
A similar mood has been growing in Australia, although it remains fragile as the end of the 2008/09 financial year approaches and investors worry about the next corporate profit reporting season in August.
"Short term worries about the impact of higher mortgage rates and oil prices, capital raisings, rising unemployment and the strength of the recovery are all likely to ensure that the ride for (Australian) shares over the next few months will be more volatile than the last three months have been," AMP chief economist Shane Oliver said.
"Note also that the period from now to September/October is often rough for shares.
"Selling shares to lock in capital losses may be an additional potential negative for the Australian share market in the run up to June 30."
The FOMC meeting is expected to result in no change to the federal funds interest rate target of zero to 0.25 per cent.
"The FOMC meeting and the ongoing debate about recovery is likely to see a very volatile week ahead," ICAP economist Adam Carr said.
On Friday, the Australian share market ended higher, with the benchmark S&P/ASX200 index rising 7.5 points, or 0.19 per cent, to 3,899.6 points, and the broader All Ordinaries index up seven points, or 0.18 per cent, to 3,894.4 points.
No major domestic economic data is due this week.
But some corporate events should capture the market's attention, such as Ten Network Holdings Ltd's third quarter results due on Wednesday.
There will also be speeches to business groups by Telstra Corp chief financial officer Jon Stanhope and Coca-Cola Amatil Ltd managing director Terry Davis on Wednesday and Thursday, respectively.
AAP
