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SYDNEY, Feb 24 AAP

February 24 2013, 1:06PM

The Australian sharemarket is expected to open higher this week but Italian elections and a speech by the US Federal Reserve chairman could lead to volatility.

The Australian futures market is pointing to a 21-point increase on Monday after the benchmark S&P/ASX200 index closed 38 points higher last week.

CommSec chief economist Craig James said while he expects a positive opening, the prediction may be a bit high.

He said Italy's elections on Sunday and Monday could destabilise the market, as could US Federal Reserve chairman Ben Bernanke's address to Congress later in the week.

"We've got the Italian elections Sunday and Monday so there's uncertainty about that and we've got an appearance by Ben Bernanke ahead of Congress this week," he said.

Mr James said the US budget cuts designed to stop the nation's economy falling off the fiscal cliff will also come into force on Friday.

These cuts could also affect markets as issues arising from them have yet to be worked out.

"The hope is that US will come up with a budget plan to address the issues but given the lack of progress there's a degree of uncertainty about that," Mr James said.

Locally, the Australian Bureau of Statistics will release figures for private new capital expenditure and expected expenditure for the December quarter.

Analysts are expecting a 1.5 per cent rise for the quarter. Mr James said the figures would have to be very disappointing to have any impact on the Reserve Bank of Australia's view on interest rates.

The Australian profit reporting season enters its final week with retailers Woolworths and Harvey Norman the highlights.

Mr James says the results of the two retailers may have an affect on the market as they will give an insight into how Australian consumer sentiment is travelling.

Overseas leads for Monday's opening are also positive.

US stocks closed higher on Friday on renewed confidence that the US Federal Reserve stimulus program will continue.

European stock markets rebounded on Friday with the euro sliding against the US dollar and traders welcoming improving economic fortunes in Germany.

By Kylie Williams