The Australian share market is likely facing a sell-off as a result of Wall Street's continuing troubles, dealers said on Friday. The market rebounded early this week following the US government's announcement it planned to spend 700 billion US dollars to rescue the financial sector.
But much of the gain was pared back amid investor jitters prompted by political wrangling over the US bailout package. For the week ending September 26, the benchmark SP/ASX 200 closed up 99.3 points, or 2.1 percent, at 4,904.8.
James Foulsham of CMC Markets said the US government's decision to close the struggling Washington Mutual, one of the country's largest savings and loans banks, had an immediate impact on the Australian bourse. He said the announcement, which came midway through the Australian trading day, would likely do little to calm financial jitters in the US.
"So we can probably expect to see some heavy selling on the US market overnight and there's the potential for that to have a flow-on effect to the Australian market on Monday," he said. Head of investment strategy and chief economist at AMP Capital Investors Shane Oliver said the focus on the turmoil in the US financial system would continue in the coming week. "If the (US government) debt relief plan is passed it will be taken very positively by financial markets, but its failure to pass could be taken badly," he said.
Oliver said the "ride ahead over the next month or so is likely to remain rough for shares as we have yet to see how the relief program will work."
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