Australian market set to open higher
The Australian share market is expected to start the week higher after good profit results in the US and favourable outcomes expected from European bank stress tests.
CommSec chief economist Craig James says the local market looks set to open 18 points higher on Monday.
This follows the Dow Jones gaining 0.8 per cent, the S&P 500 advancing 0.7 per cent and the Nasdaq rising 0.7 per cent on Friday, encouraged by good earnings from Microsoft and others during the US reporting season.
The Australian dollar is expected to hold at around 87 to 88 US cents.
With no major economic data due for local release this week, Mr James says economists will be watching the US central bank meeting over Tuesday and Wednesday, and more profit results from Australian banks.
NAB's full year results are due on Thursday while ANZ and Macquarie Bank release their earnings on Friday.
"Given the banks have such a significant weight in the index, their performance will guide investor sentiment later in the week," Mr James told AAP.
On the watch list will also be the price of oil, which continues to fall and should help retailers.
"If consumers are not spending at the petrol bowser, they're more likely to spend at retailers generally," he said.
While Australian stocks should make decent gains on Monday, AMP Capital chief economist Shane Oliver said the results of stress tests for European banks on Sunday night could affect market confidence.
Expected to be favourable or at least reasonable, the results could help our market, he said.
"It will remove the cloud hanging over the European banking system for the last year, which had adversely affected confidence in most Australian investors," Dr Oliver said.
About 25 of the 130 banks will have failed the tests, as at the end of last year, but once capital raisings by those banks is allowed for, only 10 will have failed, he said.
In world news, Dr Oliver said the ongoing war with Islamic State militants and last week's deadly terror attacks in Canada could cause "nervousness" in the market.
Last week the Australian share market posted its biggest weekly gain since February amid easing concerns about Europe. At Friday's close, the S&P/ASX200 index was 0.54 per cent higher at 5,412.2 points and the All Ordinaries was up 0.55 per cent at 5,399.3.
