market to drop at least 50 points tomorrow

NEWS HOME > BUSINESS NEWS Sunday Mar 4 14:21 AEDT
Market set to open lower
Sunday Mar 4 13:39 AEDT
The Australian bourse's four-day losing streak is expected to continue the fallout from last week's global turbulence triggered by China.

One analyst is tipping the market to fall a further 50 points with investors jumping out of the China-linked resources sector and into the defensive stocks.

In the US last Friday, Wall Street completed its worst week in four year with the Dow Jones industrial average dropping almost one per cent or 120.24 points to 12,114.10, while the Standard & Poor's 500 Index lost 16 points to 1,387.17.

The Nasdaq Composite Index retreated more than 1.5 per cent or 36.21 points to 2368.




The good news is that the Reserve Bank of Australia (RBA), which meets on Tuesday, is not expected to lift interest rates.

AMP Capital Investors chief economist Shane Oliver says the RBA is more relaxed about inflation and last week's turmoil adds to the case for a more cautious stance.

"Our assessment is that rates will be unchanged for next few months ahead of cuts later this year in response to receding inflation worries and on-going sub-par growth," Dr Oliver said.

MFS Ltd chief investment officer Guy Hutchings said Australian investors were reluctant to buy stocks last week as the market headed lower.

"I expect it to be a volatile session on Monday with the local share market opening down as much as 50 points, driven by accelerating caution in US markets following continuing concerns about impact of home lending defaults and Chinese economic imbalances," Mr Hutchings said.

"The unwillingness of investors to buy stocks following the significant falls of recent days is a clear watch point."

He believed significant selling in commodity and base metal markets offshore - notably gold, zinc, nickel and lead - should also see a flight to safety from diversified resources and mining stocks.

But analysts remain optimistic for the medium to long term saying the shake-out in the market could lead to a more sobering assessment of risk.

Citigroup said there was no reason to materially dampen optimism about the overarching outlook given the underlying fundamentals.

"Nevertheless, (last week) was an excellent reminder that expansions and markets do not move in straight lines," Citigroup said.

Key themes for investors will be further volatility in offshore markets, the search for evidence of systemic imbalances in the Chinese economy and the tail end of the local reporting season.

There will also be a plethora of business data coming out including the December quarter GDP Growth, which is expected to be around 0.5 per cent, the trade deficit, building approvals and tourist figures.

Last Friday, the Australian market closed the week with the benchmark S&P/ASX200 index 4.1 per cent lower or more than 250 points at 5786.0.


©AAP 2007