Australian shares are expected to open sharply lower on Monday as the United States inflation fears, crackdown on margin trading in China and renewed concerns about Greece that drove Friday's global sell-off persist into a second week. The most important domestic cues for local investors and traders this week include minutes of the Reserve Bank of Australia's April policy meeting, a speech by governor Glenn Stevens in New York, and CPI rates for the first quarter.
The SPI S&P/ASX 200 futures contract is set open down 0.8 per cent, or 47 points, at 5818 points on Monday, ever further from what has become an elusive 6000 point target for the market index itself.
Australian stocks ended last week with their sharpest one-day fall in three months, as unease about China and Greece and the Reserve Bank of Australia's interest-rate intentions drove profit-taking. Equities tumbled worldwide, with the Dow Jones Industrial Average losing 1.5 per cent and the Stoxx Europe 600 down a hefty 1.8 per cent.
Fears that Greece won't make payments due to the International Monetary Fund next month drove a massive flight to quality late on Friday Australian time. This pushed up bond yields on Greek, Italian, Spanish and Portuguese paper and spooked equity investors.
In the US, meanwhile, core consumer price index figures – excluding food and fuel – for March appeared to be firming, reigniting the debate on when the US Federal Reserve will start lifting interest rates.
On the local market, anything from the RBA minutes, Mr Stevens' speech or the CPI data, which will be released on Wednesday, that points to a pause in the RBA's current easing cycle or suggests a build-up in inflationary pressures would be negative for equity markets, and serve to push the Australian dollar higher against its US counterpart.
However, analysts agree the chances of a CPI surprise to the upside are remote at best.
Headline CPI advanced 0.2 per cent in the fourth quarter last year, for an annual rate of 1.7 per cent, compared with 2.3 per cent at the end of the third quarter and 3 per cent at the end of the second quarter last year.
The quarterly headline rate is expected to have eased even further in the first three months this year, to just 0.1 per cent, according to a Bloomberg survey of economists.
This would leave the year-on-year headline rate at 1.3 per cent. Meanwhile, the trimmed-mean measure watched by the RBA is expected to come in at 0.6 per cent for the quarter, compared with 0.7 per cent in the last three months of 2014. This would put the year-on-year trimmed mean at 2.2 per cent, comfortably inside the RBA's 2-3 per cent target band.
Westpac said in a note at the weekend that it based its own 0.1 per cent forecast for headline CPI on "the collapse in petrol prices through late fourth quarter and early first quarter, falling fruit and vegetable prices and the usual post-Christmas discounting".
Another key to low inflation at the moment is the lack of wage pressure, says National Australia Bank, and this is despite the surprise decline in unemployment in March, from 6.2 per cent to 6.1 per cent.
"With the unemployment rate above 6 per cent and rising, and wages growth subdued, there is little upward pressure for core inflation on the horizon," the bank said in a note at the weekend.
"NAB expects underlying inflation to be running at 2 per cent year on year at end 2015."
The data flow this week from the US is relatively thin, comprised mainly of weekly unemployment claims, house sales figure and durable-goods orders.
"We expect to learn that both new-home sales and existing-home sales strengthened further in March, " said Paul Ashworth from Capital Economics, "as the weather-related weakness in February was partly reversed."
"Otherwise, we anticipate a rebound in durable-goods orders, driven by a turnaround in the autos sector," he said.
The Australian dollar, then, will take its lead mainly from further signs of RBA interest-rate cuts, although the greenback, too, could firm after its decline last week, according to some currency watchers.
"While we expect the dollar to bounce, we do not anticipate a resumption of the rally," said BK Asset Manager managing director Kathy Lien.
"Instead, we look for most of the major currency pairs to remain within their recent range."