Australian shares posted a third consecutive session of losses as investors remained cautious about heightened geo-political risk and the re-balancing of growth in China.

Locally, company reporting season delivered mixed results against a backdrop of continued low interest rates and an improving trade balance.

The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each lost 0.4 per cent, on Tuesday to 5518.6 points and 5511.5 points respectively, despite a rebound in United States equity markets on Monday night.

Fidelity Worldwide Investment asset allocation director Trevor Greetham said the past week’s sell-off in global equities has created a good opportunity to “buy on the dip” amid “excessively bearish” sentiment.

“The sell-off could continue if the geopolitical situation worsens but we find that buying during times of panic usually pays off, especially when the fundamental outlook is positive as it is now with monetary policies set to remain loose and global growth picking up,” Mr Greetham said.

Major markets around Asia were lower in the afternoon. In China, the HSBC services sector purchasing managers index for July dropped sharply to a neutral 50 points - its lowest reading since the survey’s inception in 2005.

As was widely expected, the Reserve Bank of Australia kept the official cash rate on hold at its historic low of 2.5 per cent for a 12th month.

Company reporting season was the focus for local investors. Engineering contractor Downer EDI dropped 4.2 per cent to $4.58 as annual profits for the past June financial year ticked higher but management forecast lower profits for the current financial year, citing “very difficult” conditions in the mining services market.

There has been a slew of disappointing results and outlook statements since the latest round of company reporting kicked off. But Alphinity Asset Management Johan Carlberg said he remains optimistic the local equity market could post a third year of double digital returns this financial year.

“Companies that are in the housing sector, benefiting from disruptive technologies, and those that are showing sensible capital management are likely to perform well this reporting season,” Mr Carlberg said.

Toll road operator Transurban Group dipped 0.9 per cent to $7.58 as it delivered a 13 per cent rise in annual earnings and told shareholders it is “well positioned” for the current fiscal year.

Cochlear was the best-performing stock in the ASX 200, climbing 10.3 per cent to a 12-month high of $69, despite reporting a 29 cent fall in full-year net profit, in line with guidance. Investors were cheered by a rebound in the hearing implant maker’s sales over the six months to June.

Despite the confirmation of continued low interest rates the big four banks were all lower. Among other blue-chip industrial stocks Telstra Corporation lost 0.4 per cent at $5.41. Woolworths shed 0.4 per cent to $36.26, while Wesfarmers, owner of Coles, fell 0.9 per cent to $42.96.

Commonwealth Bank of Australia fell 0.6 per cent to $82.06, while Westpac Banking Corporation lost 0.5 per cent to $33.67. ANZ Banking Group dipped 0.6 per cent to $33.14, and National Australia Bank shed 0.2 per cent to $34.69.

Australian Bureau of Statistics data for June showed the seasonally adjusted trade deficit narrowed by 18 per cent. Lower imports and higher rural exports and volumes helped offset lower iron ore and mineral prices.

Resources giant BHP Billiton fell for the sixth session in a row, down 0.8 per cent at $38.01, while main rival Rio Tinto shed 0.2 per cent to $65.33. The spot price for iron ore, delivered in China, was 0.2 per cent firmer at $US95.40 a tonne, with the futures market pointing to a lift on Tuesday night.

Junior gold producer Medusa Mining was the worst-performing stock in the ASX 200, dropping 14.9 per cent to $1.32, as it was revealed Van Eck Associates ceased being a substantial shareholder following the release of the June quarter report last week.