The Australian sharemarket is anticipated to extend its recent losses this Monday, with futures suggesting the S&P/ASX 200 Index will open down 0.5 per cent, or 42 points. This follows a significant near $50 billion wipeout on Friday, marking the benchmark’s largest single-day decline in two months. Renewed hostilities between the US and Iran are pushing oil prices higher, sparking concerns over further inflation. Australia is particularly vulnerable, importing 90 per cent of its refined fuel, and a dozen ASX-listed companies have already issued profit downgrades due to Middle East exposure, contrasting with a strong performance on Wall Street.
While Australian stocks struggled, the US market saw the S&P 500 and Nasdaq reach record highs last week, driven by a 29 per cent rise in first-quarter earnings, largely linked to artificial intelligence firms. Domestically, anxieties are growing ahead of Tuesday’s federal budget. Investment chief Emanuel Datt notes some investors are selling assets early amid proposed changes to capital gains tax, which could potentially reduce the 50 per cent discount or introduce inflation indexation, impacting investor returns. These factors compound Australia’s existing battle with inflation, exacerbated by the energy supply shock.
The Reserve Bank of Australia has already raised interest rates three consecutive times this year to 4.35 per cent in response. Economists predict Treasurer Jim Chalmers will reveal an underlying cash deficit of about $25 billion for the year to 2027. Despite new spending measures including cost-of-living and business support, some analysts, like AMP’s Diana Mousina, suggest the market downturn could be short-lived, with a Middle East conflict resolution potentially nearing. Investors will also monitor Australia’s first-quarter wage data on Wednesday and US consumer price data on Tuesday, with money markets pricing a fourth RBA rate rise to 4.6 per cent by September.
