The rejection of Scott Morrison’s government by Wentworth voters is predicted to hit Australian stocks when trading opens on Monday.
A soft lead-in from Wall Street also means the market will open 10 or 15 points lower, AMP Capital chief economist Shane Oliver says.
“Of course the loss of the Wentworth seat adds a bit more uncertainty to the market,” Dr Oliver told AAP on Sunday.
“The market doesn’t like political uncertainty. Both the Australian dollar and the share market fell 1.5 per cent as the leadership challenge intensified in August,” he said.
A federal minority government would also be of some concern to parts of the market, the economist said.
“History has told us those risks around the election are negative to the share market, residential market and the Australian dollar,” he said.
Overall, Dr Oliver said not much was happening locally this week except for the by-election fallout and a report on skilled vacancies due on Wednesday, which would not have much impact.
The focus would be global markets, particularly in the United States and in Europe, with company earnings due out later in the week.
“I suspect US earnings will remain a focus but obviously high interest rates and the US-China trade conflict will also be watched closely,” Dr Oliver said.
The Australian dollar would also come under pressure because of the political uncertainty and he expected it to drop below 70 US cents by the end of the year.