Australian shares reversed course to settle lower on Monday, after surprisingly low inflation print in China weighed on mining stocks, while investors awaited US inflation reading due later in the week for cues on future monetary policy.

The S&P/ASX 200 index closed 0.5% lower at 7,004.0, after gaining as much as 0.6%, earlier in the session. The benchmark was at its lowest level since March 28.

Globally, markets still think the Federal Reserve is likely to hike rates later this month despite the weaker-than-expected US jobs data, but a weak CPI might lessen the risk of yet a further move in September.

Australian shares log worst week in 9 months as rate-hike fears weigh

The Reserve Bank of Australia will likely deliver a 25 basis point hike on August 1, following a pause in July, according to a Reuters poll. Investors closely eye the July consumer sentiment and business confidence data due on Tuesday.

Talking about the weakness in local bourse, Kerry Craig, global market strategist at J.P Morgan said, “it is a pretty broad based weakness I think in terms of sentiment being pretty bearish still given the outlook for higher rates to come through.”

Looking ahead, “it’s going be more around the outlook for the consumer businesses, and thinking about some of the offshore data in terms of what’s happening elsewhere,” Craig added.

Heavyweight mining stocks fell 0.7% as Dalian iron ore fell 2% amid weak factory gate prices in China as a faltering post-COVID recovery weighed on demand.

Sector majors BHP Group and Rio Tinto, both fell 1.1% each.

Energy stocks lost 0.5% after oil prices eased ahead of China, US economic data.

Financials sub-index dropped 0.3%, with three of the so-called ‘Big Four’ banks declining between 0.1% and 0.2%.

On the other hand, gold stocks climbed 1.6%. Top gold miner Newcrest Mining advanced 1.1%.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.6% to 11,912.73.