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Aussie market to rebound on Monday
29/11/2009 1:33:01 PM
The Australian share market is expected to rebound on Monday as it becomes clear that local stocks have limited exposure to the Dubai debt crisis.

Investor attention will then turn to a likely interest rate hike on Tuesday afternoon.

Australian stocks fell almost three per cent on Friday, as fears about Dubai's debt woes hammered the financial sector and wiped $38 billion off the market's value.

The benchmark S&P/ASX200 index plunged 136.5 points, or 2.9 per cent, to 4572.1, its lowest closing level since November 5.

The broader All Ordinaries dived 130.4 points, or 2.76 per cent, to 4597.2.

It was the biggest one-day percentage fall on both the All Ordinaries and the S&P/ASX 200 since June 23.

CommSec chief economist Craig James said the local market should make a healthy rebound on Monday.

"Our market overreacted on Friday to the woes in Dubai, our banks have little or no exposure and the situation in Dubai is likely to get resolved," Mr James said.

"Certainly, the US market didn't fall to anywhere near the extent that the European markets fell on Thursday and the futures market is pointing to gains."

Late on Thursday reports emerged that Dubai World sought to delay debt repayments, with its property unit Nakheel seeking a standstill agreement on a $US3.5 billion ($A3.8 billion) bond due for repayment on December 14.

Dubai World, which manages strategic global assets, had borrowed $US80 billion ($A87.6 billion) during Dubai's construction boom.

US stocks dropped in an abbreviated session on Friday over concerns that Dubai's debt crisis could stall the global economic recovery from recession.

The Dow Jones Industrial Average fell 154.48 points, 1.48 per cent, to 10,309.92 as Wall Street returned from Thursday's Thanksgiving holiday.

The tech-heavy Nasdaq composite slid 37.61 points, 1.73 per cent, to 2,138.44 and the broad-market Standard & Poor's 500 retreated 19.14 points, 1.72 per cent, to 1,091.49.

A number of key economic indicators or surveys will be released locally this week but most attention will be on Tuesday's Reserve Bank of Australia (RBA) board meeting, with its interest rate decision to be announced at 1430 AEDT.

After more data showing Australia has avoided the worst of the downturn, 13 of the 14 economists surveyed by AAP expect the central bank to lift the cash rate by 25 basis points to 3.75 per cent, following two 25-basis-point moves in October and November.

"The Reserve Bank board meets and we are looking for it to lift rates on Tuesday," Mr James said.

"We don't believe it's a certain bet by any stretch of the imagination, but we believe there's enough evidence out there for the Reserve Bank to continue lifting rates back to more normal levels."

Data to be released this week includes RBA financial aggregates figures for October, Australian Bureau of Statistics (ABS) business indicators data for the September quarter, and building approvals and retail trade data for October.

Retail giants David Jones Ltd and Harvey Norman Holdings Ltd will also hold their annual general meetings on Monday.