Euro debt to bite local commodities

Fresh warnings about the flow-on effect of the eurozone debt crisis, lower commodity prices and a negative lead from Wall Street are likely to conspire to push the domestic sharemarket lower this morning.

Sharemarket futures point to a 17-point fall on the S&P-ASX 200 today, dashing investors’ hopes for a break to the negative trend that resulted in the bourse finishing the first week of 2011 in the red.

Economists in the UK warned the debt issues plaguing eurozone nations –– which flared in Portugal at the weekend –– were at risk of spreading to the US and Japan, two of the world’s biggest economies.

“Both Japan and US public finances are unsustainable, in our view, and in the absence of credible and substantial fiscal tightening both would eventually face painful discipline through the markets, ” Citigroup economists wrote in a note to their clients.

It comes after the Dow Jones Industrial Average dipped 22.55 points to 11,674.76 and the broader S&P 500 index dropped 2.35 points to 1271.50 in the US on Friday.

CommSec chief economist Craig James said the Australian market had underperformed most world markets in January so far.

“Commodity prices are easing around the world and the Aussie dollar has come off a bit, so people are taking a more cautious attitude to Australian shares, ” he said.

Investors were likely to keep a close eye on Australian Bureau of Statistics retail trade data out today, given the sector’s vocal campaigning against tax breaks offered to online competitors amid a weak domestic consumer spending environment.