Slow start tipped for Aust share market

The Australian share market is expected to open flat this week after closing at a two-month low on Friday.

AMP chief economist Shane Oliver is tipping a small, one-point gain on Monday following falls last week on the back of escalating violence in Iraq and weak iron ore prices.

On Friday, the benchmark S&P/ASX200 index closed down 23.7 points, or 0.44 per cent, at 5,405.1 points.

Dr Oliver said indications were the Australian market would open flat or very modestly up.

"We might get a bit of a rise given the fall on Friday but I think its going to be fairly modest," he said.

"Obviously the worries about Iraq will continue for some time as investors wait to see how that resolves itself."

In Iraq, Islamic militants have overrun a large chunk of northern and north-central Iraq and are threatening the capital Baghdad.

The escalating violence has hurt global risk sentiment and sparked concerns the conflict could disrupt Middle East oil supplies, causing US markets to slump and US oil prices to spike.

However, US takeover activity and positive sales forecasts helped Wall Street close on a positive note on Friday.

The Dow Jones was up 0.2 per cent for the day, and the broader S&P index rose 0.3 per cent.

Dr Oliver is tipping the Australian market to remain volatile all week.

"We have had now a couple of weeks of declines, so there's an argument it could be due for a bounce," he said.

"But by the same token I think these worries about the impact of the budget on consumer spending will probably linger for a little bit longer.

"Likewise the iron ore price is probably going to stay soft for a little bit longer."

Dr Oliver expects Tuesday's release of the minutes from the last Reserve Bank meeting will confirm interest rates aren't going anywhere soon.

The NSW government will release its state budget on Tuesday, while the US Federal Reserve meeting on Wednesday is expected to confirm no interest rate hikes there for some time.

Dr Oliver predicts the Australian dollar will continue its rise after it gained almost one US cent to reach 94.02 US cents last week.

Bonds are expected to remain steady between 3.7 and 3.8 after closing at 3.76 on Friday.