Tag Archives: Iron Ore

article 3 months old

The Monday Report

By Greg Peel

Derivative Dive

On Friday afternoon a very large trade was booked in May 5000 put options on the SPI futures contract. Clearly the deal had been agreed upon the night before, which is why the SPI Overnight closed down a surprising 47 points on Friday morning and the SPI continued to plunge when daylight trading commenced at 9.30am.

The put options were likely bought as a market hedge and were sold by local market makers, who themselves then had to “delta hedge” by selling futures contracts. Heavy selling in the SPI then dragged down the physical ASX200 from the opening bell, and within a blink the market was down 80 points for reasons that were not immediately apparent.

Then the futures selling stopped.

It took till lunchtime to be back to square, and eventually the ASX200 finished up 12 points for the day. Given a flat Wall Street on Thursday night, the only explanation for initial market weakness – until such time as the options deal was revealed – was weakness in iron ore and base metal prices but as it was, the materials sector closed up a percent on the day. Oil prices were slightly stronger overnight but energy closed down a percent.

The only other sector to finish in the red were financials, but only just, while otherwise we saw squaring up ahead of the weekend and the Friday night release of the US April jobs numbers.

The talking point of the day came from the release of the RBA’s quarterly Statement on Monetary Policy. The board has reduced its 2016 core inflation forecast range to 1-2% from a prior 1.5-2.5%, suggesting inflation will not reach the RBA’s target 2-3% range this year. Once again it is clear the weak March quarter CPI data came as quite a shock to the central bank. Not only can we see why we had a rate cut last week, the market is now baking in a second cut, if it were not already suspecting such.

By Saturday morning the Aussie was down a further 1.3% at US$0.7367, which was all to do with the RBA and very little to do with a slight tick up in the US dollar.

Goodbye June?

The US added 160,000 new jobs in April, well short of the 200,000 expected. Previous results for March and February were revised downward. The unemployment rate remains steady at 5.0% due to a tick down in participation. On the other hand, wages grew by a reasonable 0.3%, in line with expectation.

On the release of the report, a handful of major houses issued their own reports informing that prior expectations of a Fed rate hike in June had now been pulled back to September. There is one more jobs report to go before June and another Fed meeting in July but by September, June quarter GDP growth numbers will be known. (Note: the Fed meets six-weekly, not monthly).

Once again Wall Street was caught between the benefits of lower for longer rates and the unsettling reality of a slowing pace of US growth. The Dow fell and recovered and fell again, before finally recovering to finish the session up 79 points or 0.5%. The S&P rose 0.3% to 2057 and the Nasdaq added 0.4%.

While September is now the preference for some, more dovish commentators suggest that in a year which is yet to see the Brexit vote and the US election, December is the most likely option, if only to save face. The trend in US economic data would need to turn around significantly in that time to even justify December.

This is not the sought of news incoming RBA governor Philip Lowe really needs. While local inflation has forced a rapid reaction in RBA policy, the problem of the too-strong Aussie was meant to be alleviated this year by rising US rates.

Commodities

Australians can no doubt empathise with our Canadian friends who saw a 25,000 acre wildfire in Alberta grow to 250,000 acres in the space of 24 hours. While the fires have moved close to oil sands production, no infrastructure has as yet been damaged. Production has ceased nonetheless given the evacuation of local residents means there is no one there to run operations.

The fires have put a floor under oil prices for now, but has not sent them skyward, suggesting that once Canadian production is back to normal there might not be much holding oil prices up. West Texas was only slightly higher at US$$44.56/bbl on Saturday morning and ditto Brent at US$45.33/bbl.

Lower for longer rates in the US means a weaker for longer US dollar, hence base metals prices were mostly positive in London on Friday night. Nickel and zinc were the best performers with gains in excess of one percent but aluminium fell half a percent.

Iron ore fell another US$1.80 or 3% to US$57.70, to mark a fall for the week of US$7.50 or 11.5%.

While the reduced likelihood of June Fed rate hike did not impact on the US dollar index, which was up 0.1% at 93.89, gold rallied US$10.10 to US$1287.70/oz.

The SPI Overnight closed up 22 points or 0.4% on Saturday morning.

The Week Ahead

It’s a quiet week ahead for US data releases until we get to Friday, which features retail sales, business inventories and fortnightly consumer sentiment.

The eurozone will release a first estimate of March quarter GDP on Friday.

The Bank of England meets on Thursday night but nothing is expected, especially ahead of the Brexit vote.

Beijing will release Chinese inflation data for April tomorrow.

It’s now game-on in Australia, with a double dissolution election confirmed for July 2. We knew that anyway, but confirmation still removes uncertainty.

Local data releases this week include ANZ job ads today and Westpac consumer confidence tomorrow, along with housing finance numbers.

Commonwealth Bank ((CBA)) will wrap up bank reporting season today with a quarterly update, and we now shift into a new reporting mini-season. Orica ((ORI)) will report today, Incitec Pivot ((IPL)) tomorrow, CSR ((CSR)) on Wednesday and AusNet Services ((AST)) on Thursday.

Myer ((MYR)) will release quarterly sales numbers on Thursday and there’s a handful of AGMs to be held throughout the week.

ANZ Bank ((ANZ)) goes ex-dividend today and Westpac ((WBC)) on Thursday.

Rudi will appear on Sky Business on Tuesday, via Skype-link, to discuss broker calls. He'll be back on Thursday from 12.30-2.30pm and again via Skype-link on Friday morning, around 11.05am, to discuss broker calls. Later that day he'll re-appear as guest on Your Money, Your Call Fixed Interest, 7-8pm.
 

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article 3 months old

The Overnight Report: Waiting For Jobs

By Greg Peel

The Dow closed up 9 points while the S&P was flat at 2050 and the Nasdaq lost 0.2%.

Meandering

As the dust settled over the RBA rate cut, federal budget and BHP’s larger than expected fine, the local market seemed at a loss as to what to do next yesterday. We opened down over 20 points, rallied back to be up over 20 points, and then faded away at the close. One thing is clear nevertheless – we’re not following Wall Street around like a faithful pet.

Yesterday’s data releases were on the positive side.

Retail sales rose 0.4% in March when 0.3% was expected, to a 3.6% annual growth rate. That’s below the ten-year average rate of 4.5%, but that average will continue to recede and eventually step down once the pre-GFC years roll off. We just don’t spend like we used to.

Retail spending represents around 30% of household spending and 55% of GDP. But again we have to consider such metrics to be going out of date. Commonwealth Bank’s economists note Australians are now spending less on traditional retail items, of which some 80% is “goods”, and more on non-traditional items we can call “experiences”. The savings rate, at near 9%, is historically high.

New home sales rose 8.9% in March, having fallen 5.3% in February. While many an analyst is warning of a cooling housing market, that cooling process is not a linear one. The home sales growth trend is still waning, but March sales and building approvals data and April house prices all showed a pop.

Australia’s trade deficit was $2.1bn in March when $2.9bn was expected. We can put the “beat” down to the commodity price bounce and weaker currency. Exports rose 4.3% and imports rose 0.7%. The export revival story continues for tourism, which posted a record surplus.

But none of the above seemed to make much difference yesterday. The yield stocks and offshore earners which had jumped sharply on the rate cut eased back. The banks were positive thanks to no dividend cut from National Bank ((NAB)), energy rose and materials fell. On a 0.3% gain, consumer discretionary couldn’t get too excited about the retail sales numbers.

Caixin’s measure of China’s service sector PMI fell to 51.8 in April from 52.2 in March, largely consistent with Beijing’s earlier result.

The local market may not be so ambivalent today, it appears. Base metal prices were slapped overnight and iron ore has fallen back through the psychological 60 mark. The SPI Overnight is showing down 0.9%.

Looking to June

The Dow was up over 80 points early in last night’s session but drifted back and wandered around before a flat close.

There had been a spike in oil prices early on, as wildfires in Alberta forced the closure of Canadian oil sands production, but a later report suggested production had resumed and oil fell back again.

Data releases on the day were not promising. April chain store sales posted a big miss, and left analysts scratching their heads and wondering just what’s going on with the American consumer. But as I suggested above, developed economies such of those of Australia and the US need to start adjusting their thinking away from traditional metrics that have been set in concrete for so long.

Or in bricks & mortar. US chain store sales have surprised to the downside. Last week, Amazon’s March quarter earnings release showed a much stronger than expected sales number. Perhaps there’s a clue here.

Traders were happy to square up last night ahead of tonight’s non-farm payrolls report. It’s the first of two that will be released before the June Fed meeting, but this one is not shaping up so well. The market is still tipping 200,000, but Wednesday’s ADP report fell well short of expectation and last night’s weekly new jobless claims number showed a surprise jump.

A weak non-farm payrolls number may further kill off thoughts of a June rate hike. But as to how Wall Street reacts is never easy to predict these days.

Commodities

After rising and falling back on oil sands news, West Texas is up US46c at US$44.51/bbl and Brent is up US47c at US$45.19/bbl.

Selling in base metals has intensified. This has been put down mostly to the rebound in the US dollar and the fact it was speculators and commodity funds, not end-users, that pushed prices up recently and now they are all bailing. Last night LME inventory data mostly showed lower numbers yet nickel was trashed 5%, while all of aluminium, copper, lead and zinc fell around 1.5%.

Iron ore fell US$1.50 to US$59.50/t. The US$60/t mark is considered important psychological support, hence it is feared the breach might open the floodgates to the downside. Mind you, it’s exactly what analysts have been expecting, if that is the case.

The US dollar index is up 0.5% at 93.75. Gold is nevertheless steady at US$1277.60/oz while the Aussie, having already taken a bath this week, is steady at US$0.7465.

Today

The SPI Overnight closed down 47 points or 0.9%.

There will be close attention paid to the RBA’s quarterly Statement on Monetary Policy, due for release today. Of most interest will be just how far the board has wound back its inflation forecasts.

Australia’s construction PMI is out today, while over the weekend Beijing will release China’s April trade numbers.

In between is the US jobs report.

On the local stock front, Macquarie Group ((MQG)) reports full-year earnings today and REA Group ((REA)) issues quarterly numbers.

Rudi will Skype-link with Sky Business, probably around 11.05am, to discuss broker calls.
 

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article 3 months old

The Overnight Report: Data Dependent

By Greg Peel

The Dow closed down 99 points or 0.6% while the S&P fell 0.6% to 2051 and the Nasdaq lost 0.8%.

The Lord Giveth…

Up a hundred points one day and down eighty the next – one would be forgiven for thinking the local market suddenly realised it got it wrong on Tuesday with regard the RBA rate cut, or that the federal budget was an absolute shocker. But neither is the case.

On the prospect of further mortgage repricing courtesy of the rate cut, the banks led the rally on Tuesday, backed up by every other sector that for one reason or another is a beneficiary of a lower rate and/or lower Aussie. The resources sectors stood by and watched. Yesterday the banks gave back 0.5%, but that’s hardly a shock after Tuesday’s gains. Otherwise there were only three sectors which sent the ASX200 spiralling yesterday.

Consumer staples were mildly more positive on Tuesday on the rate cut benefit, but overnight investors took a closer look at the individual plight of Woolworths ((WOW)) and the fact it has spent a lot of money trying to take on the competition, to no avail, so now it will spend more. Woolies’ 7% drop yesterday took staples back down 3.0%.

Meanwhile the energy sector plunged 5% and the materials sector 6%. Overnight oil and iron ore prices fell to provide such impetus, but such big moves are a reflection of just how hard these sectors ran last month. Then there was the announcement that BHP Billiton’s ((BHP)) Brazilian fine will be much bigger than the company had assumed. BHP fell 9%.

There were other sectors in the red yesterday but realistically if you’re in this market but not in resources, you’ve still booked Tuesday’s rally. If you’re not in banks, you’re still ahead. If you’re in the index ETF, you’ve got whiplash.

And the budget had a negligible impact on stocks yesterday.

In economic news, which no one paid attention to as they discussed their super and watched BHP fall out of bed yesterday, Australia’s service sector PMI rose to 49.7 in April from 49.5 in March – still in contraction but moving the right way.

Unproductive

When Donald Trump put his hand up as presidential nominee last year, the pundits gave him about as much chance of winning the nomination as Leicester City winning the EPL.

While there is much talk now of what a Trump presidency might mean for Wall Street, history shows stock markets are typically indifferent when it comes to new administrations. Trump is not what markets are used to in a presidential nominee, but for the meantime, life goes on.

Economic data were back in the frame on Wall Street last night. The US service sector PMI rose to a healthy 55.7 in April from 54.5 in March, but that’s where the good news ended.

The ADP private sector jobs number for April came in at 156,000, well short of a 200,000 forecast. In recent times, the ADP result has been a more accurate predictor of the non-farm payrolls number than it used to be. While a weaker jobs number would keep the Fed at bay, and thus Wall Street happy, there’s no denying the reality that a weak US economy is ultimately not a positive.

More worryingly, US productivity (GDP per man-hour) fell 1.0% in the March quarter from the previous March quarter, to mark the fourth quarterly decline in six. The annual rate is running at 0.6%, well down from the historic 2.2% average. What this implies is that while the growth in US jobs and fall in unemployment rate over the past few years looks very encouraging, it is not translating into the sort of economic growth one would hope for.

The possibility of a June Fed rate hike continues to fade.

The dollar rebound continued last night nevertheless, with the index up another 0.3% at 93.25. Oil prices were relatively steady, while iron ore fell another 2.4%. The US earnings season continues to roll on and after what was a reasonably positive start, later results suggest that heavily marked down expectations heading into the season were actually not that far off the mark.

After the flurry provided by the sharp rebound in oil, Wall Street is once again not far from slipping back into the negative for the year. But it seems there are plenty of buyers ready to jump back in at lower levels, if commentary is any guide.

Commodities

West Texas crude is up US17c at US$44.05 and Brent is down US25c at US$44.72/bbl.

Base metals mostly continued their pullback on the LME. The US dollar rebound remains a driver, as does weaker China data, but traders point to the fact the recent rally was mostly driven by speculators and commodity funds and not by end-users, so profit-taking is in play. Aluminium and zinc fell 0.5%, nickel 1% and copper 1.5%.

Iron ore fell US$1.50 to US$61.00/t.

Gold is down US$6.70 at US$1279.00/oz.

The Aussie is another 0.4% lower at US$0.7459 as forex traders bake in an assumed second rate cut from the RBA, probably in August.

Today

The SPI Overnight closed down 13 points or 0.3%.

Caixin will provide its take on China’s April service sector PMI today.

In Australia we’ll see March data for trade, retail sales and new home sales.

On the local stock front, it’s National Bank’s ((NAB)) turn to shock with a result today and BT Investment Management ((BTT)) will also report its interim. News Corp ((NWS)) will report quarterly earnings.

There are a handful of AGMs to be held today including that of Rio Tinto ((RIO)), albeit this is the local follow-up to the original AGM held in London.

Late breaking news: NAB’s result appears to have featured an earnings miss, albeit bad debts actually fell and the dividend remains intact.
 

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article 3 months old

The Overnight Report: RBA Rattles Wall Street

By Greg Peel

The Dow closed down 140 points or 0.8% while the S&P lost 0.9% to 2063 and the Nasdaq fell 1.1%.

Shock!

The RBA delivered a “shock” rate cut yesterday afternoon, apparently, due to the latest CPI data signalling “deflation”. At least those were the mass market headlines.

Actually it was a 50-50 chance, and it is clear from Glenn Stevens’ statement the disinflation experienced in the March quarter concerned the board enough to make the move:

“Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”

Media commentators may now like to go and look up the definition of deflation.

The statement again made a passing reference to a strong Aussie dollar potentially “complicating” Australia’s economic transition but “remarkably” accommodative monetary policy around the world was clearly a factor behind cutting. And “critical” to the decision was the impact felt in housing investment by tighter lending regulations, which provided the central bank with sufficient breathing space.

And didn’t the stock market love it.

Before the opening bell, ANZ Bank ((ANZ)) posted its first drop in profit since the GFC and cut its dividend. Computers sold down the stock 4% from the open. But very quickly the banks, including ANZ, were back in the green. We might put this down to (a) they were all sold off the day before, (b) ANZ’s dividend cut was not totally unexpected, (c) the market is positive on ANZ’s restructure and more prudent approach, and (d), short positions in the banks were the highest they’ve been since 2011 heading into this week.

By late morning the ASX200 was up 50 points, with buying in the banks a significant driver. The market then settled and waited. At 2.30pm, bang!

Zeroes one day, heroes the next. The ultimate 3% jump in the financials index yesterday was the major driver of the 2% rise for the index. The interesting point here is that in order to make money, banks need interest rates to go up, not down. But lower rates do take the pressure off the recent rise in bad debts which has impacted on bank earnings.

Other sector moves were more straight forward. The yielders, telcos and utilities, and consumer discretionary, which benefits from more money in punters’ pockets, each rose over 2%. The offshore earners, which benefit from a lower Aussie, drove healthcare and industrials up over 2%. The cut is a mild positive for consumer staples, which rose 1%, while the resources sectors watched from the sidelines. Energy was actually down 0.7% on a lower oil price.

And how about that Aussie? Over 24 hours it’s down a full 1.8 cents to US$0.7485 having experienced a two-step plunge. The first cent was on the rate cut, while the balance was a result of the US dollar having a much anticipated rebound last night.

But now that the euphoria has subsided, how will Bridge Street far today? The SPI Overnight is down 63 points. Oil is down, iron ore is down, base metals are down and Wall Street is down.

At least last night’s pre-election “safety” budget will have little impact.

Aussies in the mix

Nobody much noticed on Bridge Street yesterday but Caixin’s China manufacturing PMI for April showed a drop to 49.4 from 49.7 in March when 49.8 was forecast. Wall Street noticed, and China was on the list of concerns that sent the US indices lower last night.

Oil was lower, as reality continues to sink in with regard global production, while the US dollar index is up 0.5% to 93.00, stalling the currency story. These were three reasons cited for weakness on Wall Street last night.

The fourth was the RBA rate cut. It’s not that the world has recently decided the RBA has the power to move global mountains, it’s simply a matter of global sentiment.

Ever since the GFC, global stock markets have applauded every increase in central bank stimulus. But when the BoJ moved Japanese rates into the negative this year, there was a tangible shift in sentiment. Where is this currency war leading to? With the yen firmly stronger and the Nikkei weak, the BoJ is expected to have to move again. With the euro stubbornly strong, and the ECB just having reduced its inflation forecast, Mario Draghi is expected to have to continue with “whatever it takes”.

Now one of the world’s favoured carry trade destinations, the reliable, commodity-driven high yield economy of Australia, has been forced into joining the war. Clouds are gathering.

The US ten-year bond yield fell 7 basis points to 1.8% last night.

It all comes back to the Fed. But until the Fed can find any cause to hike again, there is no end in sight. The US economy grew by only 0.5% (year on year) in the March quarter.

Commodities

The US dollar index is up half a percent following a persistent drop. That’s enough in itself to send commodity prices south.

On the creeping reality of ever growing OPEC production, West Texas crude is down US$1.01 to US$43.88/bbl and Brent is down US$1.35 to US$46.75/bbl.

On the weak China manufacturing numbers, and bear in mind the LME was closed on Monday night, aluminium, copper, lead and zinc are all down over 2%. Nickel and tin were spared.

Iron ore is down US$2.70 to US$62.50/t.

Gold is down US$5.20 at US$1285.70/oz.

Today

The SPI Overnight closed down 63 points or 1.2%. Chartists have long been anticpating the 5350-5400 range as a target for the ASX200. Yesterday we hit 5353.

Australia’s service sector PMI is due today, and tonight sees the same in the US, along with the private sector jobs number for April.

Dexus Property ((DXS)) will issue a quarterly report today and several AGMs will be held, including those of QBE Insurance ((QBE)) and Santos ((STO)).

May the fourth be with you.
 

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article 3 months old

Material Matters: Chinese Data, Iron Ore, Oil, Coking Coal And Nickel

-Questions over Chinese domestic demand
-Additional iron ore supply expected
-Selling on the horizon in oil?
-Did coking coal simply lag iron ore?
-Drop in nickel output expected
 

By Eva Brocklehurst

Chinese Data

Deutsche Bank observes some large numbers in the latest Chinese trade data. Metallurgical (coking) coal imports rebounded over 70% and refined nickel over 600%, year on year. Aluminium and steel exports were up 20% and 30% respectively.

The broker observes improving industrial activity in China but expects the market to remain sceptical on the extent at which domestic demand is recovering in the absence of production data.

Aluminium semis exports have rebounded on increased domestic output with re-starts of idled capacity as a result of a rally in domestic aluminium prices.

Refined copper imports are at an all time high. Investors may be sceptical that copper is simply a case of re-stocking without underlying demand but Deutsche Bank suspects copper demand is simply lagging that of steel.

Deutsche Bank also suspects that liquidity-driven speculation has fueled prices well beyond fair value, particularly in iron ore.

Iron Ore

Further cost reductions have been achieved in the March quarter by iron ore producers as oil prices were, on average, lower. UBS observes, in some instances, producers have also decided to shut high-cost mines.

With the iron ore price rising back above US$70/dmt CFR from re-stocking, reduced supply and improved steel spreads, UBS expects additional supply will come on line as major producers ramp up to capacity.

The broker calculates that the break-even price at which a company would need to re-evaluate operations is now US$27-63/t CFR across the iron ore producers. BHP Billiton ((BHP)) and Rio Tinto ((RIO)) have been beneficiaries of lower operating and freight costs and higher lump premium, offset by the strength in the AUD. Fortescue Metals ((FMG)) has dropped its break even US$8/t to US$30/dmt.

The latest speculative spike in iron ore in China has stunned markets, Morgan Stanley observes, driving iron ore to a year-to-date peak of US$70.50/t. The broker observes a credit surge in China with new loans running at twice the 5-year monthly average.

Authorities at the Chinese exchanges have moved quickly to impose trade controls and this move to cap the trade suggests the enhanced credit liquidity may soon be curtailed. Morgan Stanley expects a short-term pull back in activity and commodity prices as a result.

Oil

While the rally may persist the risks to oil are growing, Morgan Stanley contends. The price has risen on the back of macro funds, index/ETF flows and investors fearful of missing out, but the broker notes the Middle East is bearish.

While non-fundamental rallies can last for several months, and there are few near-term catalysts, the broker believes a macro unwinding of positions could cause severe selling, given the nature of the players in this rally.

The broker finds, similar to 2015, few investors are considering the potential supply risk from OPEC. As a base case Morgan Stanley envisages OPEC production rising nearly 1mmb/d by June, with much of the gain being a seasonal ramp-up from Saudi Arabia and continuation of Iran's ramp-up as well as a resolution of outages.

Supply could rise, with a little more effort, and offset global crude demand expectations and US declines in 2016. The broker is concerned around emerging market demand and GDP given the commodity price outlook. Moreover, US supply might respond if oil moves higher too quickly.

Metallurgical Coal

The coking coal price has rallied around 20% over the past few weeks and Macquarie observes Chinese sentiment is currently bullish. Steel margins are positive and mills are wanting to re-stock raw material and increase output.

Coking coal had lagged iron ore and manganese in terms of the steel-inspired rally which Macquarie put down to fewer large-scale supply withdrawals. The market has also received a boost from lower output in Shanxi province and the Chapter 11 bankruptcy filing by Peabody, which has increased supply concerns for Asian buyers.

Macquarie expects the price of coking coal will be supported in the near term but fall back in the second half, given the broker's more conservative structural view on China.

Nickel

Supply reductions are finally beginning to have an effect on nickel, Macquarie observes. The pressure on this commodity is great, with an estimated 60-70% of mines losing money. The broker notes single asset miners were particularly defiant in the face of the falling price.

This year there has been a series of closures as hope is slowly been abandoned, Macquarie notes, and now prices have bounced, albeit along a low level at around $8,500/t.

While determining production cuts in nickel is difficult because of different ore types and a number of intermediate production stages, Macquarie estimates that cuts and losses in planned output for 2016 total around 129,000 tonnes. Based on 2015 production this represents a drop in output of around 3.2%. Macquarie estimates global production will fall by 3.8% this year.
 

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article 3 months old

The Overnight Report: Growth Has Slowed

By Greg Peel

The Dow closed up 51 points or 0.3% while the S&P rose 0.2% to 2095 as the Nasdaq fell 0.5%.

Disinflation

Cut in May and go away?

A 2% fall in the Aussie dollar over the past 24 hours to US$0.7596 would suggest the market believes the RBA has no choice but to cut next month following yesterday’s shock CPI data. The headline number fell 0.2% in the March quarter when economists had expected a 0.2% gain. The annual rate dropped to 1.3% when economists had expected it to hold steady at 1.7%.

It’s the first quarter of headline disinflation since December 2008.

The core CPI rose 0.2% when economists had forecast 0.5%. The annual core rate of 1.7%, down from 2.1% in December, is the lowest reading since 1997.

Economists are now split on whether the RBA will cut in May. The central bank has to balance a strong labour market, a solid housing market and a soaring rebound in commodity prices against disinflation and a too-high Aussie dollar. The board is carefully watching the jobs numbers for any sign of easing but there has been none to date. Analysts expect housing to soften in the second half and the commodity rebound to fade.

It appears to be a bit of a coin toss at this point.

The local stock market wasn’t taking any chances yesterday, if not backing a May cut at least expecting a cut to come sooner rather than later. The ASX200 initially rallied on the CPI release as for many sectors, a rate cut would be beneficial. But not for the banks of course. It was selling in the banks that turned a 61 point rally at the lunchtime peak into a 32 point loss at the close.

The 1.2% fall in the financials sector yesterday was the standout, both in percentage and in market cap clout. The industrials sector, in which many of Australia’s offshore earning companies lie, posted a small gain, as did consumer discretionary. Interestingly, the telcos were sold down 0.7% and utilities 0.1%, which seems opposite to what one might expect from a rate cut.

But realistically other sectors moves were fairly muted yesterday. For once the resource sectors did not take centre stage. It was all about the banks.

Tech Wreck

Facebook posted an earnings beat after the bell this morning and as I write, its shares are up 9%.

It is an against-the-trend result for this tech company when all of Microsoft, Google, Netflix, Apple and Twitter have posted weak results over the past couple of weeks. Twitter shares fell a solid 16% last night and Apple’s 6% fall took a good 40 points out of the Dow.

I mentioned yesterday that the US has two agencies monitoring weekly crude inventories and they can never seem to agree. On Tuesday night the API said a fall of a million barrels last week and last night the EIA said a rise of two million barrels. The market tends to go with the EIA, but the focus has now turned away from fluctuating weekly inventories toward the more important trend, being that of production reduction.

The EIA reported US production ticked down again last week to mark the seventh consecutive week of declines. That was enough to send the WTI price up 1.5%.

So last night Wall Street was selling tech and buying energy, which is evident in the split of movements among the major indices. The Dow was up 50 points, and could have been up 90 were it not for Apple, while the Nasdaq was down half a percent.

However all of the gain in the Dow and the S&P500 occurred subsequent to release of the Fed’s monetary policy statement at 2pm. Up until that point, the market had been poised at lower levels.

The critical sentence in last night’s statement was “growth has slowed”. Up to now the Fed has pointed to modest growth but in the meantime, economic data have not been too flash. Tonight sees the release of the first estimate of US March quarter GDP and that is expected to come in around 0.7%, down from 1.4% in December.

Those who were backing a June hate hike have now tempered their views. June is not out of the question, but the data would have to suddenly turn more positive in the interim. Many also suggest the Fed won’t hike just ahead of the Brexit vote, in fear of adding to potential market turmoil. But others find this foolish, as there are plenty of things going on all the time the Fed could use as an excuse for not changing policy, and rates would never move.

Either way, Wall Street suggested, by rallying toward the close, that June is now less likely, if it were ever likely in the first place. Attention now moves to the Bank of Japan’s policy meeting today, and the scary possibility of an even more negative Japanese cash rate.

Commodities

West Texas crude is up US67c at US$45.33/bbl and Brent is up US86c at US$47.20/bbl.

Base metal prices were a little weaker in London last night but the LME closed just as the Fed statement release is due, so tonight will tell the tale.

Iron ore is down another US$1.30 to US$62.80/t.

The US dollar index is down 0.1% at 94.40 and gold is relatively steady at US$1245.80/oz.

The Aussie, as noted, is now trading just under 76.

Today

The SPI Overnight closed up 52 points or 1.0%. Seems ambitious.

The RBNZ left its rate on hold this morning but hinted at a possible cut ahead. All eyes will be on the BoJ later today.

Tonight’s highlight will be the US GDP release.

On the local stock front, Cochlear ((COH)) and Computershare ((CPU)) will host investor days today while the quarterly production reports continue to roll in, with today featuring Independence Group ((IGO)). Mirvac Group ((MGR)) will provide a quarterly update.
 

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article 3 months old

The Overnight Report: Waiting Game

By Greg Peel

The Dow closed up 13 points or 0.1% while the S&P rose 0.2% to 2091 and the Nasdaq fell 0.2%.

Profit-taking

It looked like it was going to be a dull old day on the local bourse yesterday as the market nursed its Anzac Day hangover, but at midday someone came in and started selling, possibly out of Asia. The ASX200 pretty quickly dropped 25 points.

Half of that drop was scrounged back by the closing bell and on the sector wash-up, only two moved the dial. A dip in oil prices had the energy sector off 1.0% while the big drop in the iron ore price, following the big jump last week, saw materials down 2.1%.

The two big miners were down 3% yesterday which largely told the tale. It’s not every month you see a company like BHP Billiton ((BHP)) run up around 40% so to see a 3% drop is hardly surprising as that gain is locked in. There remains much talk among analysts of iron ore prices in the sixties being unsustainable and seasonally fleeting, so you wouldn’t want to caught if BHP heads south in a hurry once more.

The other sectors didn’t much trouble the scorer yesterday. Stock markets across the world are awaiting the two big central bank meetings this week, being the Fed tonight and the BoJ on Thursday, and not doing much ahead of those outcomes.

Bad Apple

Apple is struggling to sell iPhones in China, it would appear, which is why the share price of America’s biggest company is down 8% in the Wall Street aftermarket as I write. Aside from the central bank meetings, Wall Street was quiet last night ahead of this particular earnings release.

Twitter also disappointed by posting weaker guidance with its result after the bell and its shares are down 13%. So much for the new world, although EBay is at least up a percent, but EBay’s a bit old hat these days as well. AT&T (Dow) is trying to become a bit more new hat, and it posted a reasonable result.

It might be another bad session for the Nasdaq tonight, notwithstanding on the Fed. The Apple and Twitter results serve to emphasise the point a company’s actual earnings result is not the singular factor in determining success or otherwise. In the US earnings season to date it has yet again been the case of earnings results not being as bad as expected, but revenue has been the deciding factor in, for example, the Apple and Twitter results.

There will be a lot of focus on the US energy sector as we move towards the end of the week, with results due from major oil service provider and rig counter Baker Hughes, as well as oil heavyweights and Dow components Exxon and Chevron.

In US economic news last night, durable goods orders rose only 0.8% in March when 2.0% was expected. The Case-Shiller house price index showed prices continue to rise but at a slowing pace. And the Conference Board’s monthly measure of consumer confidence showed a bigger than expected fall to 94.2 for April from 96.2 in March.

I’d be losing confidence too watching the GOP three-ring circus.

Any economic news is nevertheless trumped – ahem – by the Fed meeting tonight.

Commodities

The American Petroleum Institute each week releases US crude inventory data on a Tuesday night before the Energy Information Agency does the same on Wednesday night. But the two numbers never match. Indeed, they are more than often not wildly different.

So we might take with a grain of salt the fact the API last night suggested a bigger than expected fall last week, thus sending West Texas up US$1.67 or 3.9% to US$44.66/bbl and Brent up US$1.56 or 3.5% to US$46.34/bbl.

Iron ore has fallen another US90c to US$64.10/t. That’s twice now the iron ore price has seen mindless surges only to retreat rather swiftly back to reality. No wonder Beijing is seeking to crack down on commodity speculation.

It was another mixed bag on the LME last night, as base metals continue to oscillate a lot but move little. Nickel and zinc both bounced back a percent while copper dropped half a percent.

The US dollar index is down 0.3% at 94.53 and thus gold is up US$5.40 at US$1243.30/oz.

The Aussie is up 0.4% at US$0.7745.

Today

The SPI Overnight closed up 20 points or 0.4%, likely because of the oil price. Those Apple and Twitter results could play havoc on Wall Street tonight, at least until 2pm when the Fed statement hits the wires.

With regard local monetary policy, today sees the release of Australia’s March quarter CPI numbers. One or two economists had been predicting a May rate cut from the RBA – the central bank often waits for quarterly inflation data before making a move – but those predictions have since been tempered following the big rebound in commodity prices.

The UK will release its March quarter GDP result tonight. As we approach June, global markets are becoming increasingly uneasy about the Brexit vote.

On the local stock front, today will bring March quarter numbers from ResMed ((RMD)) and Henderson Group ((HGG)) while high-flying APN Outdoor Group ((APO)) will hold its AGM.
 

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article 3 months old

The Monday Report (on Tuesday)

By Greg Peel

Friday

Friday’s local session was a game played in two halves. Taking a lead from Wall Street, which having rallied up to psychological levels on its major indices decided it was time to take some profits, the ASX200 fell sharply from the open.

It nevertheless appeared to be more of a case of buyers standing aside rather than sellers piling in, thus when the morning’s opening rotation was complete and close to 50 points were lost, the buyers were ready to get in at better levels. If we truly are in rally mode right now, such dips offer welcome opportunities for previous slow movers.

So by lunch time the index was back to square. But then someone pointed out that it was a long weekend, and thus Friday afternoon was all about drifting off again as traders locked in what should have been some solid short term profits and got out of the city as soon as possible.

We can always take such Fridays with a grain of salt. The profit-taking tale is most obvious if we look at the biggest sector fall on the day, that of materials, which dropped 2.4% on a day iron ore had rallied 7%. You don’t see that too often. But given the likes of BHP and co had run up some 30% from their lows as the iron ore price pushed sharply higher, it seemed like a great opportunity to lock that in. Particularly if that 7% jump seemed like a possible blow-off top.

The fall in energy was less dramatic at 1.1%, but oil prices were actually down a tad. Elsewhere, the two standout sectors in what was otherwise a fairly general pullback were the banks, which didn’t move, and utilities, which were hit 1.7%.

Interesting that the banks, which have also seen a run good run this month, should not see any notable profit-taking a day after a major broker issued a warning that the two smaller members of the Big Four could well cut their dividends next month.

As for utilities, well I noted in Friday morning’s Overnight Report that selling on Wall Street was driven mostly by yield sectors, including utilities, following a week of gains for the US ten-year bond yield. It looks like the local market saw this as a lead.

Friday Night

The Dow closed up 21 points or 0.1% to scrape back over 18,000. The S&P was flat at 2091 as the Nasdaq tumbled 0.8%.

If Bridge Street’s session was a game played in two halves, Wall Street’s session on Friday night was a game played across two halves of the market.

We tend to call stock such as Microsoft and Google “old tech” because they’re last century’s stars while the likes of a Facebook or a Netflix represent the “new tech” of the new millennium. But if we put those two together and call them “new(ish) tech” we can compare them to what we might call “very old tech”, such as railroads.

After the bell on Thursday night, earnings misses were posted by Microsoft and Google. This clearly put the frighteners through the market on Friday night, such that all tech names were unloaded in a hurry, new or old. That’s why the Nasdaq was down 0.8%.

But two major railroads posted solid results and went for a run, sending the Dow Transports (separate to the Dow Industrials) surging. Within the Dow Industrials, General Electric – the only remaining company to have been included in the first ever Dow Jones Average – posted an earnings beat while Caterpillar, which has seen the going very tough as commodity prices collapsed, suggested the bottom is nigh.

Honeywell, another old world stock (even aerospace is an old industry), also posted an earnings beat. Having run up strongly ahead of their releases, all three of these industrials saw slight dips on the day, but the distinction is clear. McDonalds is another Dow stock that is pretty old world these days, and it posted its best quarter in a very long time.

Hence the divergence on the day between the Dow and the Nasdaq, with the broad market S&P holding fast in the middle.

The US oil rig count fell by another 8 rigs last week to 343, according to Baker Hughes’ regular Friday report, marking a fifth straight weekly decline. West Texas crude rose US27c to US$43.70/bbl on Friday night and Brent rose US39c to US$45.12/bbl.

Zinc and nickel missed out on an otherwise strong session on the LME, which saw aluminium, lead and tin all up 1% and copper just a little shy.

Sentiment has clearly swung to the positive in commodities markets (and not just in rocks, but in agriculturals as well it should be noted). Recent strength has come despite the US dollar index having rebounded rather sharply over the week. It was up another half a percent on Friday night at 95.12.

This was good for the Aussie, which was able to come down 0.4% to US$0.7710 despite the big jump in the iron ore price, but not good for gold, which fell US$15.80 to US$1232.20/oz.

On Saturday morning the SPI Overnight closed up 26 points or 0.5%.

Monday Night

The US dollar index fell back again last night, by 0.4% to 94.79. The Aussie, however, is little changed from Saturday morning at US$0.7714.

And having been a feature of Friday night’s trade, the Dow Transports also fell back again last night.

Tech names continued to remain under pressure nonetheless, with all eyes on Apple’s earnings report tonight. But across Wall Street in general last night was a case of entering a new week which is not only loaded with earnings results and heavy on economic data releases, but which also sees two significant central bank policy meetings – those of the Fed and the Bank of Japan.

No one expects anything much different from the Fed on Wednesday night but the market will still look for any clues as to whether June might still be considered a rate hike possibility. The Bank of Japan has markets somewhat concerned nevertheless, as no one’s at all sure what might transpire. At its last meeting the BoJ lowered its cash rate into the negative, yet the yen has done nothing but rise ever since.

Could the BoJ go even further into the negative? While central bank stimulus around the globe is usually welcomed by stock markets, Japan’s negative rates represent an experiment that many worry could have unintended consequences.

Speaking of unintended consequences, Beijing is currently caught between a rock and a hard place as it tries to provide ample liquidity to the Chinese economy to prevent a sharp decline in growth while at the same time trying to keep a lid on debt, and potential asset price bubbles.

Over the weekend the PBoC requested that China’s major banks pare back their lending targets to 70% of what they were at the beginning of the month.

Oil prices fell from the open last night and helped the Dow down to almost a 150 point drop, but as oil eased back and other influences took over, Wall Street recovered. The Dow closed down 26 points or 0.2% while the S&P lost 0.2% to 2087 and the Nasdaq fell 0.2%. The uniformity of the index fall, traders suggests, signals positioning ahead of the central bank meetings rather than micro forces.

So since the ASX closed for business on Friday, the Dow was up 21 and then down 26. Just to drive home the fact little has changed on a net basis since Friday, the SPI Overnight closed up 26 points on Saturday morning and down 25 points this morning for a net one point gain.

Oil prices fell last night because Kuwait production is back in full swing following the three-day strike, and the country intends to increase its production levels. Iraq is close to reaching a production record, Iran continues to ramp up, and Saudi Arabia is close to completing a major oil field expansion.

If you can’t freeze it, pump it as fast as you can. It is probably surprising that this morning, West Texas crude is down only US71c at US$42.99/bbl and Brent is down US34c at US$44.78/bbl.

Volumes on the LME were to the low side last night as metal traders, too, await this week’s central bank meetings. In thin trading, copper lost what it gained on Friday night, zinc fell 2% and lead fell 3%.

A spot iron ore price is proving difficult to get hold of this morning, probably because of the long weekend, but I can report a price being quoted this morning after two sessions of US$66.07/t, down from US$68.70 on Thursday night.

Gold is up US$5.70 at US$1237.90/oz.

The Week Ahead

As noted, the Fed will release its April policy statement on Wednesday night and the Bank of Japan will meet on Thursday, as will the Reserve Bank of New Zealand.

A busy week for US data releases, coinciding with the busiest week for US earnings results, sees durable goods orders, Conference Board monthly consumer confidence, Case-Shiller house prices and the Richmond Fed index tonight, pending home sales on Wednesday and the first estimate of March quarter GDP on Thursday. The market is forecasting a mere 0.7% annual growth rate.

Friday sees personal income & spending, the Chicago PMI and Michigan Uni fortnightly consumer sentiment.

The UK will publish its first estimate of March quarter GDP on Wednesday and the eurozone will follow suit on Friday.

While attention will be focused on the BoJ on Thursday, Japan will also see monthly releases for inflation, unemployment, retail sales and industrial production ahead of a public holiday on Friday.

Monetary policy debate downunder will focus this week on Wednesday’s release of the March quarter CPI numbers, followed on Friday by the PPI.

On the local stock front, this week brings another mix of resource sector quarterly production reports, quarterly updates from other sectors, investor days and AGMs.

Production report highlights this week include those from Independence Group ((IGO)) on Thursday and Origin Energy ((ORG)) on Friday. ResMed ((RMD)) will release quarterly earnings on Wednesday, Mirvac Group ((MGR)) will issue a quarterly report on Thursday, and Thursday also brings investor days from Cochlear ((COH)) and Computershare ((CPU)).

Rudi is on leave this week.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

The Overnight Report: What Goes Up

By Greg Peel

The Dow closed down 113 points or 0.6% while the S&P lost 0.5% to 2091 and the Nasdaq closed flat.

Energised

A 5.7% gain for the energy sector about sums up yesterday’s session on Bridge Street, although it was not a lonely journey. A strong gain for oil prices overnight spurred on energy stocks but ongoing gains for iron ore with support from base metals had materials up 2.0%, while the dominant market cap sector of the banks posted a 0.8% gain.

The banks may currently be under siege from all quarters but it seems the market is more interested in bad debt relief being offered by the commodity price rebound and the flow-on of stronger commodity prices into a reduced likelihood of the RBA having to cut its cash rate.

Assuming the commodity price rally holds. But it must be said some previously bearish analysts are beginning to concede there may be some justification in recent strength beyond just short-covering and seasonal restocking.

Healthcare and consumer staples both posted 1% gains yesterday but elsewhere movements were more modest, with the telcos missing out altogether.

The ASX200 has now left 5200 behind and is eyeing off 5300 on its way, chartists are assuming, to 5400, but we may see a stumble today after Wall Street decided to take some money off the table last night. It might be a mixed bag nonetheless, with oil prices off a bit last night but iron ore going nuts with another 7% jump.

Yield Off

Mario Draghi offered up no surprises last night in leaving ECB monetary policy unchanged following the shock & awe package delivered in March.

After a couple of strong post-Doha sessions which took oil prices to new 2016 highs, it was no shock to see a bit of a pullback last night. But while this did mean a bit of selling in US energy stocks, it was not the primary reason for a generally weaker session on Wall Street on the oil correlation, which was more of a March quarter story.

With the Dow having hit 18,000 and the S&P 500 having hit 2100, following a strong run up, it was time for some consolidation. These numbers are no more important than any other but because they are round, they are targets traders will often set as a triggers for taking profits.

Yet while the pullback in stocks last night was not surprising, the spread of sector movements was interesting.

The US ten-year bond yield has been moving up recently, rebounding from the depths reached following the aforementioned shock & awe package from the ECB which dragged down German yields and thus US yields on a relative basis. While the Fed has indicated it is in no rush to hike yet and US economic data releases have not been too encouraging of late, bonds have been sold off across the globe as general panic has subsided.

As US bond yields rise, the value of high-yielding US stocks eases. When the wheels fell off in January and into February this year as the oil price collapsed, investors ran to the shelter of yield stocks such as utilities and telcos and out of cyclicals such as resources. They were rewarded as bond yields continued to fall.

That trade is now reversing. With Wall Street having returned to 2016 highs on a commodity price rebound that is looking more entrenched, steadily rising US bond yields (now back at 1.87% in the tens having been down towards 1.6%), investors are switching out of those defensive yield names in fear they may miss a cyclical push higher.

Thus last night’s hundred point fall in the Dow and pullback from the high in the S&P was more about sector rotation than it was about general market selling. We note the Nasdaq, in which it would be hard to find a solid dividend payer among the growth stocks, closed flat.

Of course we’re also in the midst of US earnings season, and after a strong start it has to be said the results have become more mixed, offering another reason for Wall Street to take a breather.

Among the Dow stocks, misses led to sharp falls for Verizon and Travelers last night while American Express managed a modest gain. In the wider market, General Motors managed a decent gain but Mattel had a session Barbie would prefer to forget.

It got worse after the bell. All of Microsoft (Dow), Visa (Dow), Google and Starbucks posted misses and their shares are down 3-5% in the aftermarket.

Tonight sees results from some heavy industry names in the form of General Electric, Caterpillar and Honeywell and global barometer McDonalds. A common theme among reporters so far has been the impact of the strong greenback in the March quarter, as well as commodity price weakness, so given both have since reversed, traders are prepared to give some weaker results the benefit of the doubt as the June quarter progresses.

Commodities

West Texas crude is down US75c at US$43.43/bbl for the new June front month and Brent, already trading June, is down US84c to US$44.73/bbl. Note how tight that spread has now become.

Iron ore, blow me down, closed up US$4.40 or 6.8% at US$68.70/t.

Trading was mixed on the LME, with nickel down 2% and zinc 1% but copper and aluminium continuing their steady rise with 0.5% gains.

The US dollar index is up 0.1% at 94.66 but gold is a little higher at US$1248.00/oz.

It looks like perhaps the forex cowboys had set themselves for an ECB rate cut into the negative last night even though no one else expected such. The Aussie had pushed higher above 78 all through the local session then suddenly plunged in European trading to be down 0.7% over 24 hours at US$0.7739, despite the big jump in iron ore and despite little movement in the greenback.

Today

The SPI Overnight closed down 29 points or 0.6%. We’re probably due an index pullback, but it could be a jumble among the sectors.

Japan, the eurozone and US will all publish flash estimates of April manufacturing PMIs tonight.

Santos ((STO)) will release its quarterly production report today.

Rudi will link up with Sky Business through Skype this morning, probably around 11.05am to discuss broker calls. Citi is calling for dividend cuts from both National Australia Bank ((NAB)) and ANZ Bank ((ANZ)) over the next few weeks, so that might have an impact in today's session too.
 

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article 3 months old

BHP Opts For Value Over Volume

-Output slowing, underpins iron ore price
-Should more allowance be made for disruptions?
-Iron ore probably dependent on steel rally
 

By Eva Brocklehurst

BHP Billiton ((BHP)) flagged a reduction in its iron ore output target for FY16, news that was largely foreshadowed by a similar decision from major rival Rio Tinto ((RIO)).

The value versus volume proposition appears to have won over BHP too, as a means, brokers believe, to underpin the iron ore price. BHP has lowered FY16 iron ore shipment guidance to 260mt, down by 10mt, and will undertake a two-year railway maintenance program at its Western Australian iron ore operations.

Ord Minnett was surprised by the duration of the rail program. The company stated this is necessary to get to 290mtpa, which suggests a bottleneck. The broker has lowered FY17 output forecasts to 269mt from 274mt and expects a tighter iron ore balance in 2017, which should be positive for prices.

The 2017 oversupply in the market is now just 55-65mt, Ord Minnett contends, and there is upside to the broker's 2017 forecast price of US$42/t. While acknowledging tighter supply and positive data out of China recently, the broker considers the stock is already pricing in upgrades and a Lighten rating is retained.

BHP remains one of Morgan Stanley's preferred mining exposures. The broker does wonder, while the rail works run for 24 months and are intended to support productivity gains, whether any allowance should be made for other production disruptions in the short term. Morgan Stanley expects the company's Western Australian iron ore output to rise to 267mt in FY17.

In the company's other commodities the Spence option that is being considered could increase copper output by 200,000t per annum, the broker ascertains. It remains in feasibility studies.

Morgan Stanley acknowledges that a decision to invest in this project, maybe up to US$2bn, would test the equity market's support for such counter cyclical development. On the other hand, Indonesian coal may not be such an option any more as the company has flagged a strategic review on the long-term future of its coal assets in that country.

In Credit Suisse's view iron ore may have more upside while the rally in Chinese steel lasts. The broker notes steel mills are enjoying rare profitability and, in lifting output, are seeking iron ore on the spot market to supplement contracts.

The question the broker asks, which reflects on the outlook for iron ore suppliers, is whether the rally in steel can continue. On this subject, Credit Suisse notes there are mixed views but it expects re-stocking should support the steel rally at least for the rest of the June quarter. If real demand for infrastructure follows to absorb the rising output then prices can be supported all year.

Macquarie reduces BHP's iron ore production forecasts in line with the company's announcement and notes a cash cost target of US$15/t has been retained for FY16, based on an average US72c for the Australian dollar. If the current strength of the currency is sustained then Macquarie expects cash costs would end up above the target.

March quarter copper equivalent production was down 2.0% quarter on quarter, with strong performances from copper and gas and under-performance from the Pilbara, Deutsche Bank observes. The broker slows its modelling of the ramp up in iron ore production with an end point of 280mtpa.

Deutsche Bank, too, suspects there could be a bigger issue with the rail maintenance announcement. The main line is experiencing a ballast stability issue which is affecting train speeds, and the speed of the trains was an important part of reaching 290mtpa by the end of FY17.

The stock is trading below Deutsche Bank's valuation but as the copper equivalent growth outlook is flat, with oil production peaking and minerals growth projects long dated, a Hold rating is maintained. UBS suspects the rail maintenance will likely push out the company's ability to reach 290mtpa until at least the end of FY18.

FNArena's database shows four Buy ratings, two Hold and two Sell for BHP. The consensus target is $20.27, suggesting 3.9% downside to the last share price. Targets range from $15.00 (Macquarie) to $28.70 (Morgans).
 

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