Sigh of relief as cliff's edge recedes

AUSTRALIA'S sharemarket is tipped to open 18 points higher on Monday, extending last week's record gains after US lawmakers last week finally signed a budget deal to avoid the country's going over the so-called fiscal cliff.

Fund managers say attention will begin to turn to the upcoming reporting season, while volumes are likely to pick up as traders return to work.

In the first full trading week of the year, the benchmark S&P/ASX 200 Futures Index shows the market will open at 4741 points, up from the 4723 close on Friday.

It comes after the local market gained nearly 100 points - or 1.9 per cent - in two days last week after the US Congress backed a deal to avoid the fiscal cliff that inspired a relief rally on global markets.

That momentum is expected to continue this week, with the Nikkei 225 (+0.7 per cent), FTSE 100 (+0.6 per cent) and S&P 500 (+0.3 per cent) all tipped to open higher.

Only the Nasdaq looks to open lower, down 0.5 per cent, while Hong Kong's Hang Seng is expected to dip 0.6 per cent on opening.

"Following the resolution of the fiscal cliff you've had a very positive reaction from markets worldwide. The focus of the domestic market will turn to whether or not there's a possibility of earnings upgrades coming through," David Liu, of ATI Asset Management, said.

"Sentiment has been pretty good due to a stabilisation in the European situation, and the fact that there hasn't been total disintegration of the eurozone.

"You've also had a recovery in the United States market," he said.

Auscap Asset Management's Tim Carleton said investors would also be focusing on conditions in China over coming months.

"For Australia the key is really what's happening in China, because that determines the demand for our resources," Mr Carleton said.

"There is a positive mood around China's leadership transition in March, commodity prices have bounced strongly, especially Australia's [top] export iron ore, and, if you believe that the Chinese stockmarket leads its economy, then its recent performance is indicating an improvement in domestic economic conditions," he said.

In the week ahead, data from the Australian Bureau of Statistics will provide a snapshot of the health of the domestic economy in the lead-up to Christmas.

Trade balance figures for November will be released on Tuesday, and retail sales and job vacancies figures for November will be published on Wednesday.

On Thursday, building approvals are tipped to show a large swing, from minus 7.6 per cent in October to plus 2 per cent in November.