The Australian share market faces further turmoil next week as it is buffeted by high oil prices, inflation fears and the global credit crunch, dealers said. For the week ending July 11, the benchmark S&P/ASX 200 index fell 102.2 points or 2.0 percent to 4,979.9, following a 3.0 percent drop the previous week.
The Australian market was oversold and due for a rally but would struggle because it was being hit by so many negative factors, said Shane Oliver, chief economist at AMP Capital Investors. "Shares are now extremely oversold and due for a bounce, but the next few months are likely to remain very rough," he said.
"The high oil price, slowing growth virtually everywhere, inflation worries and the ongoing credit crunch are all big short-term headwinds for shares," he said, expecting "further falls in the months ahead."
Oliver said investors should remain cautious over the next three months, with the main focus next week a speech by Reserve Bank governor Glenn Stevens. "(It) will be watched closely for clues on interest rates, but if anything is likely to confirm the 'rates on hold for now' view," he said. "It will be interesting to hear what he thinks about the recent weakness in most monthly economic indicators, including consumer and business confidence, job ads and housing finance."
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