Australian shares are expected to lift when the market resumes trading on Monday as positive signs from the US housing market help temper worries about a prolonged period of sluggish economic growth.
The local sharemarket is tipped to add seven points on Monday morning, according to the SPI futures market, with solid leads coming from offshore markets on stronger US housing construction data. It follows a week in which the benchmark S&P/ASX 200 tested fresh ground above 5500 points and the US S&P 500 hit record levels before market sentiment succumbed to nervousness over the tension in Ukraine and the likelihood Europe may require easier monetary policy.
By contrast, long-dated bonds have been attracting attention as investors rebalance their positions on bets that the safe-haven assets are the best place to be should interest rates stay lower for longer.
Comments on the outlook for US interest rates and quantitative easing will be key items to watch as minutes from the last Federal Reserve Open Market Committee meeting are released and chairwoman Janet Yellen speaks at New York University on Wednesday.
''It might well be that the Fed starts increasing the policy rate or signals its intention to increase the policy rate in the second half of this year,'' BlackRock head of fixed income Steve Miller said.
He said the prospect of lower interest rates for longer was likely to force the Fed to change its view on the long-term equilibrium for the Fed funds rate.
The benchmark S&P/ASX 200 shed 32 points, 0.58 per cent, to close at 5479 points on Friday. By contrast, the US benchmark S&P 500 added 0.37 per cent to 1877, the Dow Jones Industrial Average rose 0.27 per cent to 16,491, London's FTSE 100 put on 0.22 per cent to 6855 and China's Hang Seng slid 0.08 per cent to 22,712.
The federal budget was the big-ticket item in Australia last week but it wasn't as tough as many economists were expecting, keeping shares in check and the local currency in a tight trading range of US93¢ to US94¢. The dollar settled at US93.63¢ on Friday afternoon.
It could receive a lift from China's flash HSBC PMI, due on Thursday. Many economists expect it will rise slightly and confirm only a modest slowdown of growth.
In Australia, the minutes from the Reserve Bank of Australia's last board meeting are due on Tuesday and expected to confirm the central bank holds a neutral stance on interest rates. But economists will also pay close attention to key consumer sentiment data on Wednesday, which should provide an insight into what households think about the budget.