Recessionary fears continue to build ahead of cash rate changes

The cash rate is the interest rate on unsecured overnight loans between banks. It is the (near) risk-free benchmark rate (RFR) for the Australian dollar and is also know by the acronym AONIA in financial markets. As It is expected to be a big week for equity markets with important economic data to come out this week.

Central Banks in England, Europe, and the USA all to announce their updated official cash rates. This should hopefully provide some market direction before the end of the year. Last week the market failed to break out through its long term down trend. The Nasdaq suffered from recessionary fears dropping by 4.02%, the Dow Jones was less severe falling by 2.77% and the S&P500 fell by 3.37%. A positive catalyst such as lower than expected inflation may launch boost the sentiment of the market.

In Australia, the ASX200 dropped by 1.21% following the pressure from the USA. Brent oil had one of its worst weeks since the beginning of the pandemic dumping by 10.48% to $76.79 a barrel. Gold held up better, closing 0.12% higher for the week in what was a choppy week for the commodity.

Stocks In the Spotlight

BHP, (BHP)

The largest mining company in Australia has saw its share price move to its 6-month high as the potential reopening of China has helped improve overall prospects. Mores specifically, with China reopening, the spot price of iron ore has been steadily rising and BHP has been the beneficiary of this. The hope is that with the reopening China‘s growth will begin to pick up and the demand for BHP’s ore will increase. Even though there have only minor policy changes so far, the hope is that the presence of at least some adjustment indicates a shifting China policy. In addition, the rebound may come faster and sooner than expected. This has also coincided with a lowering of US government bond yields and a weakening US dollar which has been positive for commodity prices. The current BHP share price is $47.48.

Sandfire Resources, (SFR)

Sandfire resources is one of the few Australian coppers mining companies listed on the ASX. Like BHP with the potential reopening of China and a weaker US dollar, the company has benefited from more favourable conditions for overall growth and better commodity prices with the Copper rising above US $8500/t. The company only last month announced a capital raising at $4.30 worth 200 million dollars to bolster its balance sheet and pay down some of its debt. SFR, for the most part has seen its share price decrease over the last 12 months although in recent days and weeks the price has moved higher than even the capital raising price and is now trading at $5.67.

Regis Resources, (RRL)

The gold mining producer has seen its share price recover over the last 6 months after having to deal with lower gold prices. The company that has operations in both NSW and WA like most mining companies has seen its prospects improve, with the USD weakening and the price of commodities rising again. The share price has recovered to 6-month highs. The companys shares are currently trading at $2.07 and looked to have formed a strong technical base. The price is still well down from its all-time high of $6.48 that it reached in July 2019.