Morning Note: Market news and an update from miner BHP

Market News

Financial markets gave a mixed verdict on US President Donald Trump’s first day in office as traders took heart from an absence of immediate sweeping tariffs on all trade partners, while also expressing caution over likely future measures. The President also Lifted a moratorium on new US licenses to export LNG, signed action to end some birthright citizenship, revoked an EV mandate and declared intent to withdraw from the Paris climate accord.

Equity markets Asia were mixed this morning – Nikkei 225 (+0.3%); Hang Seng (+0.9%); Shanghai Composite (flat) – after Trump initially opted against announcing any new levies on the country. At the same time, the dollar rose as he said he planned to impose threatened tariffs of as much as 25% on Canadian and Mexican imports as soon as 1 February. Treasuries rallied – the 10-year now yields 4.56% – as the lack of broader new tariffs eased concern about quicker inflation. Gold edged higher to $2,725 an ounce.

The FTSE 100 is currently little changed at 8,531, while Gilt yields held steady at 4.66% as Ray Dalio say the UK may need to borrow more to service debt. Sterling trades at $1.2270 and €1.1830. The FT reports Rachel Reeves has launched a bid to protect car-loan providers in mis-selling case. The Treasury stated that the case has the “potential to cause considerable economic harm and could impact the availability and cost of motor finance for consumers”.

Apple’s iPhone sales in China fell 18% in the holiday quarter, causing a 5% global slump in iPhone sales. Huawei surpassed Apple as the top seller in China, with a 15.5% sales increase driven by new device launches.

ECB Governing Council member Peter Kazimir sees three to four more interest rate cuts starting next week. German residential real estate operator LEG Immobilien is cautiously optimistic about the new year. The company expects the market to continue to stabilise in 2025, but does not yet see a strong upward trend.

Source: Bloomberg

Company News

BHP has this morning released an operational review for the half-year ended 31 December 2024 and nudged up its full-year production guidance. The shares have drifted over the last couple of years, in part due to the decline in the price of iron ore, combined with its failed attempt to acquire industry rival Anglo American. In response to today’s update, the shares are down 1% in early trading.

BHP is a diversified resources company with exposure to iron ore, metallurgical coal, copper, nickel, and potash. Assets are high quality and largely located in lower-risk jurisdictions, with strong development potential. The group’s capital allocation framework provides flexibility at the bottom of the cycle and discipline at the top, and has seen a shift in focus to low-cost, high-return projects. BHP has positioned itself to benefit from the unfolding mega-trends of decarbonisation, electrification, population growth, and the drive for higher living standards in the developing world, which it sees becoming key drivers of commodity demand.

During the latest six-month period, the group’s flagship copper, iron ore, and steelmaking coal assets delivered particularly strong production. The company highlights it is well positioned to continue strong momentum into its second half with a number of assets now expected to deliver production in the upper half of their respective ranges. The company has maintained sector leading cost discipline and remains on track to deliver FY2025 unit cost guidance across all assets

Copper volumes rose 10%, with Escondida in Chile achieving a 10-year production record (+22%), more than offsetting the impact (-6%) of a weather-related power outage at Copper South Australia. The average realised price rose by 9% to $3.99/lb.

Western Australia Iron Ore (WAIO) shipped record half-year tonnes (+2%), enabled by supply chain improvements following the completion of major debottlenecking at the port. The average realised price fell by 22% to $81.11/t.

Steelmaking coal tonnes from the BMA operations were up 14%, although the average realised price fell by 23% to $206/t. The Western Australia Nickel operations (-31%) were safely transitioned into a period of temporary suspension

BHP has made further progress on its ‘growth pathways’ in future facing commodities. In January, the company completed the formation of Vicuña Corp. with Lundin Mining to advance the Filo del Sol and Josemaria projects in Argentina, one of the most significant global copper discoveries in decades. In Canada, the Jansen Stage 1 potash project is now 63% complete, with first production scheduled for late 2026, and BHP continues to execute Stage 2 in parallel.

The company has a strong balance sheet, with a net debt as at 31 December 2024 expected to be between $11.5bn and $12.5bn. For the full year to June 2025, the net debt is expected to increase to around the top end of the target range of $5bn to $15bn following completion of the Vicuña transaction and payment of the H2 Samarco dam failure settlement obligations.

BHP’s dividend policy provides for a minimum 50% payout of underlying attributable profit at every reporting period and the company has a track record of delivering robust shareholder returns through the cycle. The announcement of the payout for the latest half-year will be announced with the results on 18 February.

Source: Bloomberg