Australian stocks were likely to be range-bound in the coming week, with downside moves seen as temporary setbacks in a larger consolidation trend, dealers said For the week ending May 15 the benchmark S&P/ASX 200 lost 168.5 points, or 4.28 percent, to close at 3,773.2.
"Australian shares fell over the week on the back of the poor global lead, capital raisings and some profit downgrades," said AMP Capital Investors chief economist Shane Oliver.
Describing it as an "air pocket", Oliver said Thursday's 3.44 percent fall in the market reflected a momentary lapse of confidence in a global economic recovery. "With the recession remaining severe, uncertainty remaining over the timing and strength of the economic recovery and credit conditions still tight it is inevitable that the share market will be beset by occasional setbacks and volatility," he said. However, Oliver said any corrections would be minor.
"We remain cautiously optimistic that any pullbacks will be corrections in a rising trend as shares continue to factor in better economic conditions six to 12 months ahead," he said.
"While the ride is likely to be rough, there is good reason for cautious optimism that the rebound in shares from their March lows is the start of a cyclical recovery as opposed to just another bear market rally." IG Markets analyst Ben Potter said the local market would take a crucial lead from Wall Street, with a swathe of economic data due out of the United States overnight.
"There's bound to be a few worse-than-expected numbers in there," said Potter. "If the market can shrug them (off) and look for the positives, it will do a lot to boost sentiment and confidence."
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