Some pain but a lot more gain

The sharemarket may experience a short-term correction in trading this week but is expected to continue making gains into the longer-term future.
CommSec chief equities economist Craig James said the overall picture was positive.
"Underpinned by an incredibly favourable economic environment, we believe that the current sharemarket rally has further to go," Mr James said.
"That doesn't mean that it is all one-way traffic - it has risen by 200 points in just six days. A correction is looming."
AMP Capital Investors' Dr Shane Oliver sort of agrees.
"Although shares are at risk of a further pull-back in the short term on the back of renewed worries about the US economy, a significant correction is unlikely and the broad trend is likely to remain up," he said.
"Valuations are still not stretched, profit growth remains solid ... the US economy is weak [while] the rest of the world is sound, the prospect of lower interest rates in the US will help support and push price-to-earnings multiples higher, and the flow of funds into both global and Australian shares is likely to remain strong."
Among company earnings to be reported this week are those of Australia's largest investment bank, Macquarie Bank, on Tuesday and takeover target, retailer Coles Group, on Thursday.
There is also a lot of local economic data to come, with figures for housing finance, wages and consumer confidence all expected this week.
The local bourse will have the support of a positive close on Wall Street on Friday, as US stocks rebounded from their steepest fall in two months on Thursday on reassuring inflation news that may give the Federal Reserve room to lower interest rates. The Dow Jones industrial average was up 111.4 points, or 0.84 per cent, at 13,326.5. The Standard & Poor's 500 Index was up 14.37 points at 1,505.84. The Nasdaq Composite was up 27.78 points at 2,561.52.
For the week, the Dow was up 0.47 per cent, S&P 0.2 per cent and Nasdaq down 0.41 per cent.
Dr Oliver said his outlook on the Australian dollar also was positive overall.
"While the Australian dollar is undergoing a correction, it has more upside ahead of it, probably to the February 1989 high of US89.50c," he explained.
"The interest rate differential versus the US is set to widen with the US edging toward a rate cut and the risks are still skewed to the upside for Australian interest rates, commodity prices are likely to remain strong and the normal tendency for currencies to go to extremes all suggest that the trend in the Australian dollar will remain up."
But anyone looking for crude oil prices to ease may be disappointed. "With global demand for oil remaining strong, OPEC successful in restraining global supply and inventories low, crude oil is likely to hold between $US60-$US65 a barrel," Mr James said. "Global supplies are expected to lift late in 2007 but until then, price risks are on the upside."