Fed jitters to weigh on local shares

The Australian sharemarket is expected to open in negative territory on Monday despite a late surge at the end of last week.

Local investors are nervous before the US Federal Reserve’s policy board meeting on Wednesday, amid speculation the Fed will soon wind back its third round of bond purchases, known as quantitative easing, or QE3.

Locally, the ASX 200 futures market is pointing to a fall of 26 points when the market opens.

AMP Capital chief economist Shane Oliver said the market will remain volatile until the results of the Fed’s meeting are released.

‘‘There’s still quite a bit of nervousness going into the Fed’s meeting on Wednesday as to what will be the signal regarding tapering quantitative easing and interest rates and that’s probably going to cause volatility in the week ahead,’’ Dr Oliver said.

After recent falls on the local market, investors were taking a renewed interest in higher-yielding banking stocks and telcos, he said.

‘‘Overall, I think the Fed’s message is going to be taken positively by markets but there will be some nervousness in the lead-up to it.’’

It comes after US stocks gave up an early rally and ended lower on Friday due to investor caution.

Minutes of the Reserve Bank’s June board meeting will be released on Tuesday while the Westpac-Melbourne Institute leading indexes of economic activity will be released on Wednesday.