RBA Decision Looms as Australian Shares Slide

Australian shares declined on Monday as investors awaited the Reserve Bank of Australia's (RBA) interest rate decision, while a profit miss from National Australia Bank (NAB) weighed on market sentiment.

The S&P/ASX 200 index dropped 0.4% to 8,697.10 after losing 0.7% last week. NAB's shares fell 1.2% to their lowest level since August 18, dragging the financials sector down by 0.1%. This marks the third of the 'big four' banks to raise provisions for potential losses related to the Iran war.

Vantage Markets market analyst Hebe Chen noted that these provisioning signals point to an early turn in the credit cycle, with credit cost normalisation and forward guidance being key factors for upcoming bank results. Investors are positioning cautiously ahead of the RBA's decision on Tuesday, which is widely expected to be a hike.

Chen also warned that if the RBA signals inflation is entrenched and keeps further tightening firmly on the table, equities may face another round of repricing. Local shares of a2 Milk plummeted 9.8% after announcing a recall of three batches of infant milk formula sold in the US due to toxin contamination. Endeavour also contributed to the decline with its 3.8% fall, flagging higher fuel and freight costs.