US fiscal deal brings relief to markets

THE sharemarket is expected to open 18 points higher on Monday, extending last week's record gains after US politicians signed a budget deal to avoid its so-called fiscal cliff.

Fund managers say that attention will begin to turn to the 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/ASX200 Futures Index shows the market opened at 4741 points, up from 4723 points on Friday.

The local market gained nearly 100 points, or 1.9 per cent, in two days last week after the US Congress's deal produced a rally on global markets.

That momentum is expected to continue this week, with the Nikkei 225 (up by 0.7 per cent), the FTSE 100 (up by 0.6 per cent) and the S&P500 (up by 0.3 per cent) all tipped to open higher. Only the Nasdaq looks like opening lower, down by 0.5 per cent, while Hong Kong's Hang Seng is expected to fall by 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," Above the Index Asset Management's head of research, David Liu, said.

"Sentiment's 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 US market."

A principal at Auscap Asset Management, Tim Carleton, said investors would focus on conditions in China in coming months.

"For Australia, the key is really what's happening in China because that determines the demand for our resources," he said. "There is a positive mood around China's leadership transition in March [and] commodity prices have bounced strongly."

Data out this week includes a snapshot of the economy in the lead-up to Christmas; and trade balance figures, retail sales and job vacancies figures for November.