Aust market may be cautious after Wall St drop

Although the Australian sharemarket has held up reasonably well to date, investors are likely to remain cautious this week as the market comes under pressure due to a sharp fall on Wall Street last week.

The Dow Jones, Nasdaq and Standard & Poor's 500 index all fell on volatile trading on Friday. Markets are awaiting news on the US economy from Federal Reserve chairman Alan Greenspan early this week.

In Australia, the focus this week will be on the July consumer confidence index and the National Australia Bank quarterly business survey. AMP Global Investors economist Simon Doyle says the consumer confidence figure will be of interest, as will the June quarter CPI to be released later this month. Any sign of continuing inflation may mean the Reserve Bank will lift interest rates in August, he said, but the one thing that might stop the RBA would be a further fall in the stockmarket.

HSBC Australia said it expects the NAB survey to show a slight firming in business conditions and steady business confidence. With regard to consumer confidence, HSBC believes the RBA will be looking for some weakening in July to temper household consumption. HSBC also said it's too early to rule out an interest rate rise in August, particularly since employment is rising.