ASX dips as NAB warns on economic uncertainty; a2Milk recall

The Australian sharemarket closed in the red on Monday as National Australia Bank’s half-year report missed market expectations, and there were also sharp falls for retailer Accent Group and dairy company a2 Milk.

The S&P/ASX 200 closed 32.7 points, or 0.4 per cent, lower at 8697.1, with seven of 11 industry sectors in negative territory.

The decline came as banking giant NAB reported weaker-than-expected numbers for the first half, dragging its shares 1.6 per cent lower as it warned that business customers were being challenged by higher fuel costs, inflationary pressure and rising interest rates.

NAB’s first-half cash earnings fell 26.3 per cent in annual terms, to $2.6 billion, weighed down by a $949 million hit to profit due to changes in the bank’s accounting policies on software. Excluding the hit from these accounting changes, the bank said cash earnings rose 2.3 per cent compared with the September half.

“Conflict in the Middle East has created a far more volatile environment, and we expect that to continue for some time to come,” NAB chief executive Andrew Irvine said. Irvine said an Australian recession was “possible” but he did not think it was probable.

Among other banks, Commonwealth Bank dipped 0.5 per cent, Westpac edged up 0.1 per cent while ANZ Bank rose 1.9 per cent.

Accent Group tumbled 12.9 per cent as the operator of shoe retailers Platypus and Hype DC said the Australian Securities and Investments Commission (ASIC) was investigating possible breaches of the law in relation to trading in Accent shares last year.

Accent told the ASX that the company had been required to preserve communications concerning chief executive Daniel Agostinelli, non-executive director Michael Hapgood and another senior employee of the company.

Accent said the investigation related to trading between May 23 and June 10 last year – the company told the market last year that an entity linked to Agostinelli had sold shares in that period.

Accent said on Monday that no charges had been laid and there were no allegations against the company.

“Mr Agostinelli’s on-market share sales were pre-approved by the former chair of Accent at the relevant time. Mr Agostinelli has the full support of the board in his ongoing role as CEO,” the company said.

ASIC did not comment.

Dairy company a2Milk tumbled 9.9 per cent after it announced it was recalling batches of a product sold in the US after detecting a toxin linked to vomiting and nausea.

Three batches of a2 Platinum USA-label formula were recalled after manufacturer Synlait Milk identified the presence of cereulide, a2 said on Monday. The recall affects just the US and not the company’s most lucrative market in China. The recall is in relation to a relatively small quantity of three batches comprising 63,078 tins of which an estimated 16,428 tins were sold to consumers, the company said. No confirmed incidents of infant illness or harm have been reported, it said.

The owner of Dan Murphy’s, Endeavour Group, fell 4.1 per cent after it said sales momentum had “moderated” recently amid growing cost-of-living pressures.

Endeavour chief executive Jayne Hyrdlicka said that despite economic conditions and geopolitical uncertainty affecting consumer sentiment, Endeavour’s retail business had maintained positive sales growth.

A key focus for the market on Tuesday will be the Reserve Bank of Australia’s decision on interest rates, with money markets tipping a further hike in the cash rate.

The main uncertainty for the global economy is where oil prices are heading because of the Iran war. US President Donald Trump said on Monday (AEST) that the United States would begin guiding neutral ships out through the Strait of Hormuz and signalled progress on talks with Iran to end the war, which is now in its 10th week. Oil prices edged lower in response, in early Asian trade, with Brent, the international standard, down 0.3 per cent to $US108.09 ($150.08) a barrel while US oil lost 0.3 per cent to $US101.66 at 12.17pm AEST.

The slide in oil prices sent local energy stocks lower, with Woodside Energy down 3.1 per cent while Santos retreated 1.4 per cent. Refiner Viva Energy lost 3.2 per cent after saying that repairs to the processing unit damaged in a major blaze at its Geelong refinery would take about six weeks to complete.

Mining stocks were mostly lower, with Rio Tinto down 0.7 per cent and Fortescue falling 0.4 per cent. BHP shares were effectively flat. Gold stocks were mixed, with Northern Star sliding 0.3 per cent and Evolution Mining adding 0.3 per cent.

Technology stocks rose, with tracking app Life360 jumping 6.22 per cent, while Xero rose 2.9 per cent and Technology One 0.3 per cent. WiseTech shed 0.6 per cent.

Southern Cross Media rose 0.8 per cent after chair Heith Mackay-Cruise announced his intention to resign on Monday morning after an influential shareholder called for him and two other directors to step down on Friday. Teresa Dyson, a director from Kerry Stokes’ old publishing empire Seven West Media, will be the new chair of the radio network that absorbed the media mogul’s former TV and publishing company in January. The merger, which had been sold as a merger of equals, quickly began to resemble a takeover by Southern Cross after Mackay-Cruise ousted a number of Seven-aligned senior staff and became executive chairman. That period is now ending.

The Australian dollar was trading at US72¢ at 4.44pm AEST.

With AP, Reuters

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