Staples lead ASX down; A2 Milk sinks on formula recall; Citi backs Xero price rise; Endeavour flags Middle East impact; NAB misses forecasts; ANZ warns on oil prices. Follow live.
Australian shares closed lower on Monday as investors awaited the Reserve Bank of Australia’s interest rate decision and direction on monetary policy as the Middle East war reignites inflationary concerns.
The S&P/ASX 200 Index was down 32.7 points, or by 0.4 per cent, to 8697.10 after trading between a low of 8675.4 and a high of 8738.1. Seven of the 11 sectors were weaker with public holidays in Queensland and the Northern Territory. The bond market has priced in an 83 per cent chance of the RBA raising interest rates on Tuesday by 0.25 percentage points to 4.35 per cent, undoing all the rate cuts the bank made last year.
An expected rate rise saw the Australian dollar trade near a four-year high of US72.24¢ – shy of its 2022 peak of US72.27¢ touched on Friday. Westpac head of AUD rates strategy Damien McColough said markets were awaiting to see the messaging from the RBA, particularly around the level of restrictiveness or what is achieved with investors split about what the next steps are.
“We expect eye-catching forecasts for inflation and that suggests a hawkish tone to the move,” he said. “As such, we would not expect the market to pare back current pricing for future meetings at all. ” McColough said a further one-to-two rate hikes is most likely given the domestic inflation outlook and global risk to expectations, but some in the market say the RBA could end tightening after Tuesday.
Against that backdrop were mixed messages from the Middle East as President Donald Trump said the US would start guiding neutral ships trapped in the Persian Gulf out through the Strait of Hormuz. Oil steadied around $US107 a barrel as Iran warned any US interference in the strait would be a ceasefire breach and amid reports by Reuters that Iranian officials have instructed all commercial ships from any movement in the chokepoint without coordination with the regime.
Consumer staples was the weakest after Endeavour Group 3.8 per cent to $3.29 as it revealed plans to slash head office jobs and optimise its procurement to help reach a $100 million cost savings target, as it delivered a weaker than expected trading update and warned on higher costs from the Iran war. Coles fell 3.9 per cent to $22.02 after it was cut to “neutral” by Jarden, and Woolworths lost 0.8 per cent to $33.89.
Energy also weighed as Woodside Energy lost 3.1 per cent to $32.11 and Santos 1.4 per cent to $7.91. Viva Energy slid 3.2 per cent to $2.42 as it targeted a June restart of a key Geelong refinery unit after a fire last month, with production set to return above 90 per cent of capacity once repairs are completed. Financials were mixed as ANZ rose 1.9 per cent to $36.29 after an upgrade from UBS.
National Australia Bank fell 1.6 per cent to $39.20 after its first-half cash profit of $2.64 billion came in slightly below expectations. Technology paced gains, tracking record highs on Wall Street after strong tech earnings. US-based Life360 soared 6.2 per cent to $21.23 and Xero gained 2.9 per cent to $82.92 as Citi said the group’s latest price increases are expected to drive upside to FY27 earnings forecasts.
Stocks in focus In corporate news, The a2 Milk Company tumbled 9.9 per cent to $6.55 after it launched a voluntary recall of three batches of its US-labelled a2 Platinum infant formula after detecting cereulide, a toxin linked to foodborne illness, in products sold in America. Accent Group dropped 12.9 to 54¢ after a sharper downgrade to its full-year earnings than feared by about 8 per cent. It also announced a probe by the corporate regulator.
Southern Cross Media added 0.8 per cent to 60¢ after chairman Heith Mackay-Cruise announced he would step down after a major shareholder called for his removal. Shipbuilder Austal reversed earlier losses to end flat at $4.21 as it was awarded a $136 million contract extension for the construction of two additional Evolved Cape-class patrol boats for the Australian Border Force.
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