Daily Dose of financial insights for investors and traders: Gold glitters on recession concerns, Energy crisis back on the agenda

December 2 2022

Markets rally, on inflation easing. ASX200 at a seven month high

Aussie share market had it worst day in about four weeks, falling 0.7%on Friday. But despite that, as they say the long term trend is your friend; the ASX200 closed off the week at its highest level in 7 months. The market has gained about 13% from October. Over the week; the market held onto a gain of 0.6%; and the ASX200 is just 4% away from its record all time high. What’s supported markets you might ask? Well economic data this week showed inflation pressures are easing for now. Both in the US and Australia. This offers hope to mortgage holders, corporates and equity markets. Hope that the US central bank, the Fed, won’t need to be so aggressive with rate hikes in two weeks. And in Australia; there’s hope the RBA can potentially stop hiking rates later next year. So markets are forwarding looking, and this is what has been supporting equity markets for now.

Big market moves; gold equites shine   

Today was all about all that glittered. Gold. Gold stock ripped higher hitting their highest level since July; St Barbara rose 10% after an investment firm bought a major stake in the gold miner. Silver Lake rose 6%. with other gold miners following. It’s all because the gold price made its best weekly gain in four weeks, up 2% today and this week. Remember, gold, the safe haven metal, traditionally does well when times are tough. And overnight the US economic slowdown gained pace with constructions and manufacturing data slowing. The US manufacturing sector fell into a contraction for the first time in two years. So this supports the Fed not being so aggressive with rate hikes. That supports the US dollar potentially continuing to fall. And this supports gold moving up.

Economic news in Australia gives the RBA more room to stay dovish 

On the economic news front in Australia, Home loan data showed lending is continuing to fall and much more than expected. Home loans fell 2.7% in the month, following the 8.2% drop last month. We think home loan demand will continue to fall and that this will continue to pressure property prices into 2023.

Company news

Santos lost a court appeal to restart a $3.6 billion gas project, as Indigenous groups were not properly consulted on the plan.

Also in energy news, coal producer Coronado cut its production target for the year, as rain from La Nina has prevented it from getting as much coal of the ground that it wanted to.

The takeaway here, is that Australia will continue to grapple with a lack of physical energy supply. Which is why we think energy prices will continue to rise next year. The RBA is also of the same view. 

What to look for in coming days

In the US; the final monthly employment report will be released before the Fed’s next interest rates decision. So tonight what’s released is non-farm payrolls. The market is expecting 200,000 jobs were added to the US in November, which is 60,000 less than October.

On December 4; The Organization of the Petroleum Exporting Countries (OPEC) and their allies meet. Although a policy change is seen as unlikely.

In Australia next week; the RBA meets on Tuesday. A 0.25% hike is expected. 

The Australia Dollar continues to rally 

The AUDUSD trades up about 10% from its October low, supported by the fact that China's 3rd biggest city is easing restrictions. 

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