Investors keep eye on Wall Street

Canberra, June 6 (AAP) - Local investors will be eagerly awaiting the outcome of trading on Wall Street on Monday night after US stocks plunged more than three per cent on Friday. The Australian Securities Exchange was closed for a holiday on Monday as regional markets headed down in response to last Friday's lead from Wall Street. Friday night trading on Sydney's futures market, often taken as a good guide to the following Monday's opening on the local bourse, was also down two per cent. "That could all change overnight if investors in the US thought that the sell-off on Friday was unwarranted and it starts roaring back," CommSec chief equities economist Craig James said. "The other important thing is that the rises in oil prices and commodity prices generally has been beneficial for Australia. "It's good news for the likes of Woodside Petroleum and BHP Billiton. So if the oil price remains high we'll benefit from that sort of development." Wall Street went into a dizzying decline on Friday night as a record surge in crude oil prices combined with a sharp jump in US unemployment to send traders scurrying for cover. The Dow Jones Industrial Average plummeted 394.64 points (3.13 per cent) to end at 12,209.81 as all 30 blue-chip shares in the index lost ground. Wall Street traders were stunned by the biggest-ever one-day rise in crude oil futures, adding to worries about a weak economy. New York's main oil futures contract, light sweet crude for July delivery, leapt $10.75 a barrel to close at a record $138.54 as fears of a new Middle East conflict were fanned by comments from a top Israeli politician about an attack on Iran. "It's been very much a fear driven sell-off on Friday," Mr James said. "A fear that a sharp rise in the oil price will mean further downward pressure on the US economy." Mr James noted the $16 rise in the price of crude oil over the last two days of trading last week was "unprecedented". "It certainly highlights the influence of speculators in the market. That's why investors have to be very wary in this sort of environment. Just as the oil price can rise very sharply over a short space of time it can also retreat." AMP Capital's chief economist Shane Oliver said shares were likely to remain volatile and under pressure in the short term. The May to October period was often difficult for shares and the full fallout from the US housing slump, credit crunch and high oil prices along with rising inflation was yet to be seen. "Australian shares are also yet to see the full fallout from the rise in local interest rates and the strong Australian dollar," Dr Oliver said in his weekly update. Local shares were also vulnerable to weaker commodity prices over the next few months along with tax loss selling this month. Dr Oliver warned shares could fall five per cent below their current levels. Yet despite further weakness over the next few months, shares should hold above their March lows and were likely to move higher into year end. Dr Oliver predicted the benchmark ASX200 could be back up to around 6350 points by the end of the year. In the week ahead, the NAB business survey will be released along with data for consumer sentiment, housing finance, job ads and employment. On Friday a speech by Reserve Bank of Australia governor Glenn Stevens will be scrutinised for clues on interest rates.