Australian shares are likely to test fresh five-year highs this week with more support for risky assets after US Federal Reserve nominee Janet Yellen indicated asset-driving stimulus would continue for as long as required by the world's biggest economy.
Brokers say the prospect of the Fed's $US85 billion ($90.7 billion)-a-month bond buying program being prolonged could help Australian shares rise above June 2008 highs.
"Money coming out of fixed interest is looking for a home," said stockbroker Shawn Hickman, owner of Market Matters. "A lack of bad news from Janet Yellen and some good company reports last week like James Hardie and Orica are helping to instil further confidence in the market and a general economic recovery."
Further gains in the local sharemarket could make Christmas come early for the more bullish brokers who have been forecasting an end-of-year target for the S&P/ASX 200 of 5500 to 5600.
It closed at 5401.7 points on Friday and is expected to open higher on Monday, with SPI futures tipping a 46.3-point or 0.86 per cent gain. The Australian dollar should also find support beyond its US93.6¢ trading point from Friday.
Expectations of a benign inflation figure for the US - due on Wednesday - is likely to support plans for the Fed to delay tapering stimulus.
The market expects the Fed to announce tapering in March next year, although speculation has grown that it may happen sooner if the December payrolls report is better than expected.
Locally, the focus will be on the minutes of the Reserve Bank's November board meeting on Tuesday and HSBC manufacturing conditions PMI on Thursday.
Also this week are speeches by Reserve assistant governor Guy Debelle on Wednesday and governor Glenn Stevens on Thursday.
"Really what is likely to be more interesting is RBA governor Glenn Stevens' speech on Thursday," Royal Bank of Canada's Su-Lin Ong said. "I think the [November board minutes] are more outdated than usual because they have been superseded by the RBA's quarterly statement on monetary policy [released earlier this month]."