Another interest rate hike is looking almost certain on Tuesday, but how much more can our economy take?

The Reserve Bank of Australia (RBA) has already lifted rates 3 times this year, and another 2 increases could be on the way.

According to The Australian, HSBC chief economist Paul Bloxham now puts the risk of Australia falling into recession at around 50%.

He expects the cash rate to reach 4.85% by November, which isn’t exactly welcome news for anyone with a mortgage.

With economic growth already slowing, there’s a chance the RBA could go too far with rate hikes and push the economy into recession.

So, what does HSBC see coming?

HSBC sees recession risk climbing

Bloxham expects the RBA to lift the cash rate by 25 basis points tomorrow, taking it from 4.35% to 4.60%.

And while another increase is expected in November, his bigger concern is what those additional rate hikes could do to the economy.

HSBC expects economic growth to come close to stalling around the end of the year, potentially leaving Australia facing a technical recession.

That would mean two consecutive quarters of economic contraction, something we’ve largely managed to avoid outside the COVID-19 pandemic.

And that’s something investors will want to keep an eye on.

Higher borrowing costs and weaker consumer spending could hurt earnings across the ASX, especially among banks and retailers.

Bloxham is also expecting property prices to fall 13% from their peak, which would be the biggest decline in up to 40 years.

That could spell further trouble for housing-related stocks, particularly if fewer people are buying and selling properties.

Not everyone is expecting a recession

Of course, not every economist thinks we’re heading for a recession, with Westpac Banking Corp (ASX: WBC) expecting the economy to keep growing.

Its modelling points to quarterly growth of 0.6%, with investment in data centres expected to help keep things moving.

But Bloxham isn’t convinced that spending will make much of a difference.

He estimates around 85% of the investment involves imported equipment, meaning much of the money could end up going overseas.

For ASX investors, the next few months will be worth watching, particularly as companies start feeling the impact of higher interest rates.

And while a recession isn’t guaranteed, I’d be careful with stocks that depend heavily on people continuing to spend.

What happens next?

Tomorrow’s RBA decision is the next big one to watch, followed by Wednesday’s inflation figures.

All 29 economists surveyed by Bloomberg expect another 25-basis-point hike this week, although they’re not certain about what happens in November.

Nonetheless, the RBA will need to be careful how much further it pushes rates.

The post Australia’s recession risk hits 50% as RBA prepares to lift rates appeared first on The Motley Fool Australia.

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HSBC Holdings is an advertising partner of Motley Fool Money. Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended HSBC Holdings. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Xero Ltd (ASX: XRO) share price has had a terrible time over the past year, dropping by more than 60%, as the chart below shows.

The cloud accounting software provider has lost investor confidence, and its profitability isn’t growing as it used to.

Xero’s latest result was mixed.

Earnings recap

In the 2026 financial year result, meaning the 12 months to 31 March 2026, customers grew 11% to 4.9 million, operating revenue grew 31% to $2.75 billion, operating profit (EBITDA) grew 24% to $790 million, net profit after tax (NPAT) declined 27% to $167 million, and free cash flow rose just 9% to $554 million.

Xero said that Melio-related acquisition costs affected its profitability. While the market may not be totally convinced about Melio, it could be crucial to growth in the US.

Its international markets are growing strongly – that’s countries beyond Australia and New Zealand – international revenue grew 47% to $1.4 billion or 25% on an organic basis excluding Melio. US revenue grew 240%, or 30% on an organic basis excluding Melio. UK revenue grew 26%, with customer growth of 14%.

ANZ continues to see solid growth, with revenue rising 18% to $1.4 billion.

Xero is leaning on price rises to be a significant driver of its financials, which is helping drive a number of revenue metrics. Average revenue per customer grew by 23% to $55.44, annualised monthly recurring revenue (AMRR) soared 37% to $3.27 billion and the total lifetime value (LTV) of customers increased 17% to $21 billion.

The ASX tech share said that it expects operating revenue to be at least $3.6 billion and adjusted EBITDA to be at least $860 million, implying year-over-year growth of at least 30% and 13.6%, respectively.

Is the Xero share price a strong buy?

There are certainly plenty of concerns about what AI could mean for software players like Xero, but its financials continue to show progress, which will likely re-energise the market in the future, in my view.

According to CMC Invest, the business has received three analyst ratings in the past three months.

Of those three analysts, the average price target is $108.53, suggesting a rise of 89% over the next year. Even the most pessimistic of the three analysts has a price target of $85, suggesting a possible rise of 48% over the next year.

Clearly, analysts think the business is undervalued, and the multiple looks reasonable based on free cash flow. If its financials can excite the market again, it could be materially undervalued.

The post How much could the Xero share price rise in the next year? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It’s shaping up to be an interesting start to the week for Northern Star Resources Ltd (ASX: NST) shareholders.

The gold mining giant has had a difficult run lately, with its shares falling despite gold prices remaining relatively high.

And following reports over the weekend, investors have something else to consider when trading gets underway today.

Northern Star shares finished Friday’s session down 0.72% at $22.11, leaving the stock around 17% lower in 2026.

So, what’s happened?

Northern Star rejects takeover approach

According to The Australian, Northern Star has rejected a takeover approach from South African mining giant Gold Fields Ltd (JSE: GFI).

Gold Fields is reportedly considering its next move after Northern Star knocked back the proposal.

Northern Star has a market capitalisation of approximately $31.5 billion, making it one of Australia’s largest gold producers.

Gold Fields already has a significant presence in Western Australia, having acquired Gold Road Resources for roughly $3.7 billion last year.

That deal gave it full ownership of the Gruyere gold mine, which the two companies previously operated through a joint venture.

A takeover of Northern Star would add several major Australian gold mines to its portfolio, including the Super Pit in Kalgoorlie.

It would also create one of the world’s largest gold producers.

Elliott has been pushing for change

The reported takeover approach comes as Northern Star faces growing pressure from US activist investor Elliott Investment.

Elliott holds approximately 6.24% of Northern Star following a difficult period of operational setbacks and disappointing shareholder returns.

In June, the investor identified Gold Fields, AngloGold Ashanti, Agnico Eagle, and Newmont Corporation (ASX: NEM) as potential strategic partners.

It has also been calling for changes to Northern Star’s board, and some of those changes are already underway.

Former Anglo American boss Mark Cutifani and mining executive Peter Rozenauers are set to join the board on 1 October.

Meanwhile, Suresh Vadnagra will take over as chief executive on 5 October, with chairman Michael Chaney stepping down in November.

Foolish takeaway

The big question now is whether Gold Fields returns with another approach or decides to walk away.

I think the reported takeover interest is positive news for shareholders, especially after the stock’s difficult run this year.

With new leadership coming in and several potential buyers already identified, I suspect this won’t be the last approach.

Northern Star shares have fallen 9% over the past month, so shareholders could certainly use some positive news.

I’ll be watching from the sidelines to see whether the takeover news helps the stock recover some of its recent losses.

The post Northern Star shares on watch after major takeover approach rejected appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.