Australian share prices are likely to drop slightly this week but without repeating the free-fall that saw the largest weekly market slump since the September 11, 2001 attacks on the United States, dealers said.
The market suffered heavy losses of more than two percent on both Wednesday and Thursday but steadied slightly by Friday. Investors sold on a combination of profit taking and fears about US inflation and historically high oil prices.
Much will depend on the key US September employment report - due later Friday - and the lead it can give after senior US Federal Reserve officials issued a series of warnings about rising inflation and the need to keep it in check.
With job losses expected after the devastating Katrina and Rita hurricanes, any wider disappointment could prove damaging.
For the week to October 7, the benchmark SP/ASX 200 index closed down 200.6 points or 4.52 percent at 4,440.6 to end a record-breaking bull run in September while the broader All Ordinaries plunged 192.7 points 4,399.9.
AMP Capital Investors head of investment strategy Shane Oliver said the losses had punctured the buoyant mood that has driven the Australian exchange to recent highs but did not signal the onset of a bear or falling market.
"While the correction may still have a little further to run over the next few weeks, on a six to 12 month view global shares remain on track for reasonable gains," Oliver said.
"We expect the market to be making new highs by the end of the year and into next year and as such it should be seen as providing a buying opportunity," he added.
Australian jobs and consumer sentiment figures are due out this week but market attention is likely to be concentrated initially on the US employment figures.
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