The Australian sharemarket is expected to open lower today as local investors practise caution ahead of expectations the US Federal Reserve could wind back its third round of bond purchases.
Despite posting a late surge at the end of last week, the ASX 200 futures market is pointing to a fall of 26 points when the market opens today.
Local investors are expected to be more cautious this week ahead of the US Federal Reserve's policy board meeting on Wednesday amid speculation it could ease its massive asset-buying program that has helped boost stockmarkets.
Fed chairman Ben Bernanke recently suggested the Fed could begin winding down its $US85 billion ($88.5bn) a month bond purchases within months if the economy continued to show signs of improvement.
AMP Capital chief economist Shane Oliver said the local market would remain volatile until the results of the Fed's meeting were released.
"There's still quite a bit of nervousness going into the Fed's meeting on Wednesday as to what will be the signal regarding tapering quantitative easing and interest rates, and that's probably going to cause volatility in the week ahead," Mr Oliver said.
After recent falls on the local market, investors were taking a renewed interest in higher-yielding banking stocks and telcos, he said.
"Overall I think the Fed's message is going to be taken positively by markets, but there will be some nervousness in the lead-up to it."
Minutes of the Reserve Bank of Australia's June board meeting will be released tomorrow while the Westpac-Melbourne Institute leading indexes of economic activity will be released on Wednesday.
The benchmark S&P/ASX 200 closed up 2 per cent last week, or 96 points, at 4791.8, its steepest rise since January last year. It hit a 5 1/2-month low of 4658.6 on Thursday, at which point it was down more than 11 per cent in four weeks.
