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MELBOURNE, Feb 3 AAP

February 03 2013, 2:11PM

The Australian share market is expected to open higher on Monday, following positive offshore leads and futures trading.

US stocks rallied sharply on Friday, with the Dow closing above 14,000 for the first time since October 2007 after a positive US jobs report.

In comparison, Australia's ASX200 index is only trading at about 20-month highs.

The Dow Jones Industrial Average closed at 14,009.79, up 149.21 points (1.08 per cent).

The broad-based S&P 500 finished at 1,513.17, up 15.06 (1.01 per cent), while the tech-heavy Nasdaq Composite jumped 36.97 points (1.18 per cent) to 3,179.10.

The Dow's breakthrough of the psychological 14,000 barrier followed a US jobs report showing net jobs grew at an average 181,000 a month in 2012, well above forecasts of 153,000.

German and UK stocks also posted strong gains on Friday around the 1.0 per cent mark.

On Sunday, the ASX 24 March share price index futures contract was pointing to a 24 point gain on Monday to 4,903 points.

CommSec chief economist Craig James said while he also expected gains to start the week in Australia, he thought they would be more modest than futures trading was pointing to.

The strong offshore gains on Friday were related to profit-taking that had occurred the previous day to mark the end of January, which had already happened in Australia, he said.

"I think it will be higher, certainly all the positive factors are there, but perhaps the expectation in terms of the futures market may be a little bit on the firm side," he told AAP.

"We have reporting season starting up, the interest rate decision and investors have got to have a degree of caution going into the week."

The optimism that has seen a bull run in shares in recent weeks will be tested by the start of the Australian earnings season.

On Tuesday, the Challenger Diversified Fund is expected to report with Cochlear, Transurban, Reckon and Navitas also listed.

On the economic front, the monthly inflation gauge, building approvals and job advertisements will be released with a modest lift in building tipped by CommSec.

The Reserve Bank of Australia is not expected to move rates, amid signs the global economy is improving.

Last Friday, the Australian market returned to its two-week bull run as investors, buoyed by a positive US earnings season, turned to high-yielding stocks with the market up nearly six per cent for the year.

At the close on Friday, the benchmark S&P/ASX200 index had risen 42.3 points, or 0.87 per cent, at 4,921.1 points, and the broader All Ordinaries index was up 40.9 points, or 0.83 per cent, at 4,941.9 points.

By Greg Roberts