Australia's sharemarket is expected to start the week sliding further, with economists saying that last week's rally was a little overblown.
The benchmark S&P/ASX 200 Index advanced 1.1 per cent last week after the US Federal Reserve shocked investors by keeping its $US85-billion-a-month asset-buying program at full steam. The market was expecting a $US10 billion taper.
But the optimism that spread across the globe may be short-lived. On Friday, the ASX gave up 0.4 per cent, after rising more than 1 per cent on Thursday after the Fed's decision.
The losses were sharper in overseas trade on Friday night, with Wall Street slipping off its record highs. The Dow Jones Industrial Average fell 185 points, or 1.2 per cent, while the S&P 500 shed 23 points or 0.7 per cent.
The nosedive came after the president of the St Louis Federal Reserve Bank, James Bullard, said the Fed could start scaling back its massive bond-buying program at its next meeting in October, if the economic data was strong enough.
Mr Bullard said the Fed was looking for signs of further strength in US payroll and employment figures. "To the extent that these two important labour market indicators continue to show improvement, the likelihood of tapering policy action will continue to rise," he said.
ASX SPI futures indicated a soft start to the week, down 23 points. CommSec chief economist Craig James said that made sense, adding that last week's rally was a bit of an overreaction.
"All the Fed was saying was that they are delaying [tapering] not cancelling it," Mr James said. "The US is actually going quite well.
"And markets were already weaker on Friday, following a bit of profit-taking."
Mr James pointed to losses to ASX heavyweights BHP Billiton and Rio Tinto in their respective London listings in overnight trade on Friday as pulling Australian shares further into negative territory on Monday.
The miners' losses came after Mr Bullard's comments triggered a fall in metals prices. Copper slipped off its month high of $US7368 a tonne, to $US7280 at Friday's close.
Ongoing concerns about the US debt ceiling, which Congress must decide on mid next month, are expected to further weigh on investors this week.
But AMP chief economist Shane Oliver said local markets could also get a boost when purchasing managers' indexes (PMIs) are released in China, Europe and the US, with China's figures predicted to show Australia's biggest trading partner is on the mend again.
But he agreed with Mr James, saying overall the big question was whether sharemarkets had run a bit too hard and too fast.
"With these debt ceiling negotiations on the way in the US, it's quite possible we might have a bit of a speed bump or correction over the next month or so," he said.