AUSTRALIAN stocks are expected to start the last full trading week before Christmas on a cautious note amid continuing negotiations over the looming US budget deadline.
Futures trading was pointing to a weak start on the Australian market on Monday, after Wall Street closed lower as investors fretted over the likelihood of the US President, Barack Obama, and legislators in Congress reaching a deal over the fiscal cliff.
The chief economist at CommSec, Craig James, said despite some encouraging US manufacturing, inflation and industrial production data - and BHP Billiton and Rio Tinto being well supported in London trade - the fiscal cliff was dominating sentiment.
"If we could solve the fiscal cliff problem, then everything would be all right," Mr James said on Sunday.
A series of US tax rises and government spending cuts, referred to as the fiscal cliff, are due to hit at the start of next year.
Unless an agreement is reached, these measures are expected to push the US economy into recession, which would have a significant knock-on effect on the global economy.
On the ASX 24, the December share price index futures contract ended Friday night's session down 10 points at 4571, on volume of 7108 contracts.
In New York, the Dow Jones Industrial Average fell 0.27 per cent, the S&P 500 fell 0.41 per cent and the Nasdaq Composite fell 0.7 per cent.
"Progress in resolving the US fiscal cliff remains slow," said Shane Oliver, the chief economist at AMP Capital Markets, in a research note dated December 14. "An agreement before year end would be a good outcome for equity markets."
The minutes of the Reserve Bank of Australia's December board meeting are due out on Tuesday, while the Westpac-Melbourne Institute leading index of economic activity report will be released on Wednesday.
The RBA cut the cash rate by 25 basis points to 3 per cent at its December meeting.
ANZ, DuluxGroup and Incitec Pivot are among companies holding annual meetings this week.
The Australian Competition and Consumer Commission is expected to issue determinations on Qantas Airways' proposed alliance with Emirates and carsales.com.au's deal with the Telstra-owned Trading Post.
The Australian dollar finished weekend trading at US105.72¢, up from US105.44¢ at Friday's close.
Australian stocks have risen about 2 per cent so far in December.