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This underscored investor jitters following the nation’s twice-a-decade Communist Party congress, where President Xi Jinping loyalists dominated key posts. Xi’s control over the nation’s power structure suggested policies such as COVID-zero and the state’s curbs on private enterprise would likely continue, dimming the outlook for the nation’s financial assets.

Saxo Markets analyst Jessica Amir said she expected volatility within the Australian sharemarket after China’s trading tumble triggered a degree of uncertainty throughout the local index, particularly within commodities, energy and materials stocks.

“There’s a lot of mixed noise from China at the moment, it’s kind of hot-cold,” she said. “Will they be lifting restrictions sooner than expected? There was a lot of optimism about that, and then we had President Xi throw cold water on it last week … Things are choppy.”

Many of the companies heavily dependent on trade with China, such as BHP, Rio Tinto, and Fortescue Metals Group, would continue to struggle as long as China maintained its COVID-zero policies since lockdowns pull iron ore demand down, said Amir.

Despite energy and materials stocks such as Ampol slipping on Tuesday, Amir said they were still the market’s “driving force” this year. She believed they would soon bounce back once energy prices stabilised.

“Energy companies have delivered the strongest earnings growth this year,” said Amir. “They’ve come off a very high base. So, if you think about Ampol, they’re still on track for the year to deliver a record result. It’s just come back a bit because the crude oil price has fallen from its high.”

Meanwhile, the federal budget will be released on Tuesday evening. Although the rapid rate rises used to rein in skyrocketing inflation could cloud global outlook, State Street Global Advisors Clive Maguchu and Garvit Srivastava remained cautiously optimistic.

“At its last meeting, the Reserve Bank of Australia provided a sign that they will moderate the pace of hikes in contrast to the hawkish stance of peer central banks,” Maguchu and Srivastava wrote in their economic analysis on Tuesday. “Despite this dovish surprise, we think the policy rate could climb to 3.0 per cent by December and peak near 3.6 per cent, as we expect price pressures to stay above RBA’s target for longer. Hence, there is some room for the RBA to hike into 2023.”

The Australian Bureau of Statistics will release its Consumer Price Index (CPI) data on Wednesday. ANZ head of Australian economics David Plank said consumer confidence dipped 1.3 per cent last week, its fourth consecutive weekly decline (although this figure increased in Victoria and Queensland). He also said weekly inflation expectations climbed by 0.1 percentage point to 6.1 per cent, attributing these changes to ongoing cost-of-living pressures.

“Over the past four weeks, confidence has declined 7.6 per cent as household inflation expectations have risen by 1.1ppt [percentage point],” said Plank. “Confidence for those paying off their mortgage was down 4.7 per cent, dropping to its lowest level since the early months of the pandemic.”

Tweet of the day:

Quote of the day: “This is a malicious attack that has been committed by criminals with a view of causing maximum fear and damage, especially to the most vulnerable members of our community,” said Medibank chief executive David Koczkar amid revelations on Tuesday that the private medical details of former and current Medibank customers were obtained in the recent hack on the private health insurer. The stolen data includes names, addresses, birthdates, Medicare numbers, contact information, and claims data.

You may have missed: Australians should brace for further price rises at the checkout. As customers reduced their spending, grocery sales slowed. Consequently, analysts predict supermarkets will reveal soaring prices for fresh and packaged foods in their coming quarterly updates, as well as substantial inflation across all other products. A UBS quarterly review of grocery price inflation put food inflation at 8.2 per cent for the last quarter, with fresh food outpacing packaged grocery prices.

With AP, Bloomberg

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